In a bid to preserve cash amidst a significant labor dispute, Boeing has announced sweeping cost cuts, including a hiring freeze, a pause on nonessential staff travel, and a reduction in supplier spending. The company is facing a strike by over 30,000 factory workers, primarily in the Seattle area, who walked off the job on Friday after rejecting a tentative labor deal.
The strike, which marks the first for Boeing factory workers since 2008, has brought most of the company's aircraft production to a standstill. Workers are demanding better wages and benefits, leading to a stalemate in negotiations.
The strike has already had a significant impact on Boeing, with the company announcing "significant reductions" to supplier spending and halting most purchase orders for its 737 Max, 767, and 777 jetliners. This move highlights the far-reaching effects of the strike, which extends beyond Boeing's own workforce to its extensive network of suppliers.
Boeing's new CEO, Kelly Ortberg, has expressed a desire to resume negotiations with the striking workers as soon as possible to reach a new agreement. The company maintains that it is working in good faith to resolve the dispute, but recognizes the severity of the situation and the need to take steps to mitigate the financial impact.
The financial implications of the strike remain uncertain, with the severity of the impact hinging on the duration of the labor action. The company is taking proactive measures to conserve cash, including exploring temporary furloughs for employees, managers, and executives.
Rating agencies have expressed concerns over the strike's potential impact on Boeing's financial performance, with Moody's placing Boeing's credit ratings under review for a downgrade. Fitch Ratings also indicated that a protracted strike could put Boeing at risk of a downgrade, potentially leading to higher borrowing costs for the already debt-laden manufacturer.
The strike comes at a difficult time for Boeing, which has faced a series of challenges in recent months. The company experienced a production slowdown in the first half of 2024, leading to significant financial losses, estimated at $8 billion. These losses were partially attributed to a near-catastrophic door-panel blowout incident earlier in the year.
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