Boeing Implements Furloughs and Cost-Cutting Measures Amid Ongoing Strike
As the strike by the International Association of Machinists and Aerospace Workers (IAM) enters its second week, Boeing has announced that designated employees will be required to take one week of unpaid leave every four weeks on a rolling basis. This move is part of the company’s cost-cutting measures in response to the strike. In a memo sent out on September 18, Boeing CEO Kelly Ortberg stated that the furlough would be temporary and affect a large number of executives, managers, and other employees in the United States. The Virginia-based aerospace giant, which had a workforce of 171,000 at the start of the year, hopes that these measures will help preserve its long-term future during this difficult time.
To minimize the impact on affected employees, they will retain their benefits during the furlough period. Ortberg also mentioned that senior executives, including himself, would take pay cuts, although the exact extent of these cuts was not specified. While this decision undoubtedly impacts everyone involved, Ortberg emphasized that it is a necessary step to navigate through the challenges posed by the ongoing strike.
The IAM strike, which encompasses over 33,000 employees across Washington state, Oregon, and California, was triggered after the union members rejected Boeing’s offer of a 25 percent wage increase spread over four years. The union is now demanding a 40 percent wage increase, annual bonuses, and a return to a pension system that they failed to secure in a 2014 contract extension.
As a result of the strike, Boeing’s commercial airplane production, primarily concentrated in the Pacific Northwest, has been significantly disrupted. However, Ortberg assured employees that production of the 787 Dreamliner at the company’s non-union South Carolina plant would resume. He emphasized that activities critical to safety, quality, customer support, and key certification programs would be prioritized and continue.
In addition to the planned furloughs, Boeing has implemented a hiring freeze, reduced spending on suppliers, and cut most business travel. These measures aim to preserve cash and ensure a successful recovery for the company. However, negotiations between Boeing and IAM, mediated by the Federal Mediation and Conciliation Service, have not yet yielded a breakthrough. The IAM expressed frustration in a recent update, stating that the company was not prepared to address the essential issues raised by the union, namely wages and pensions.
Boeing now faces the risk of a credit rating downgrade if the strike is not resolved promptly. Ratings agency Moody’s has placed the company on review for a potential downgrade, and Fitch has warned that a strike lasting more than two weeks would increase the likelihood of a downgrade. Such a downgrade would make borrowing more expensive for Boeing.
In conclusion, Boeing’s decision to implement furloughs and other cost-cutting measures underscores the challenges the company faces amidst the ongoing strike. While the company strives to preserve its long-term future, negotiations between Boeing and IAM remain at an impasse. The potential credit rating downgrade further highlights the urgency for a resolution to the strike, as it could have far-reaching financial implications for Boeing.
