Boeing (BA) is facing a startling workforce issue that can have a major domino effect on business.
The aerospace company is facing a strike from about 33,000 unionized workers who are fighting for better pay, decreased out-of-pocket health care costs, retirement security, etc., amid ongoing quality and safety challenges the company is facing with its aircraft.
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As workers are fighting to settle on a new contract after the previous one expired on Sept. 12, Boeing Chief Financial Officer Brian West warned employees in a memo obtained by Fox Business that the strike will have negative effects on the company. This includes hiring freezes, an end to first- and business-class air travel for employees and a pause on charitable expenditures, among other cutbacks.
West also claimed that the company is considering temporarily laying off an unknown number of employees in the next few weeks.
"Our business is in a difficult period," said West in the memo. "This strike jeopardizes our recovery in a significant way, and we must take necessary actions to preserve cash and safeguard our shared future."
According to a new report from Reuters, analysts from Northcoast Research estimate that the strike can cost Boeing roughly $100 million in daily revenue. So it is no surprise that Boeing is taking drastic measures to preserve its money.
"Boeing will most likely remove 33-35 jets from the original production plan, resulting in a loss of $102 million in daily revenue," said Northcoast Research analyst Chris Olin, according to Reuters.
More Boeing:
Boeing to get off easy for 737 Max crashes, victims' families sayNew Boeing whistleblower alleges company lost faulty plane partsNew Boeing CEO has a huge mess to untangleBoeing faces major financial strain amid production issues
Even before the strike, Boeing faced significant financial challenges after it was hit with a probe from the Federal Aviation Administration, which looked into its 737 Max production. The investigation kicked off after an Alaska Airlines flight on Jan. 5 was forced to make an emergency landing after a door plug blew off of a Boeing 737 Max 9 aircraft mid-flight.
In Boeing's second-quarter earnings report for 2024, Boeing revealed that its revenue during the quarter declined by 15% compared to the same time period last year, and it faced a net loss of about $1.4 billion.
You can read the full memo that West sent to employees below.
Team,
As you know, our IAM 751 and W24 represented employees in the Pacific Northwest are on strike. We are working in good faith to reach a new contract agreement that reflects their feedback and enables operations to resume.
However, our business is in a difficult period. This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future. Importantly, we will protect all funding for safety, quality and direct customer support work.
Actions include:
Instituting a hiring freeze across Boeing for all levels, and pausing on any pay increases associated with internal executive and management promotionsStopping any travel that is not for critical customer, program, regulatory or supply chain activityEliminating all first and business class air travel, including for the Executive CouncilSuspending non-essential capital expenditures and facilities spendingSuspending outside consultant spend and temporarily releasing non-essential contractorsPausing charitable and other contributions, and advertising and marketing expendituresReducing company participation in airshows, tradeshows and special eventsPausing employee recognition and team event spendingStopping catered meal and food services at Boeing facilities unless customer relatedCancelling any team off-site meetings. On-site meetings that require travel should be made virtual.
In parallel to the steps above, we are planning to make significant reductions in supplier expenditures and will stop issuing the majority of supplier purchase orders on the 737, 767 and 777 programs. We are also considering the difficult step of temporary furloughs for many employees, managers and executives in the coming weeks.
I know that these actions will create some uncertainty and concern, as well as many questions. We'll be sharing additional information in the coming days as we have detailed guidance on implementation of these measures.
Brian
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