Boeing will soon begin furloughing employees and cutting executives’ salaries to save cash amid a costly ongoing strike by 33,000 members of its machinists union.
“We are initiating temporary furloughs over the coming days that will impact a large number of US-based executives, managers and employees,” Boeing chief executive Kelly Ortberg said in an 18 September email to all employees.
“Along with these steps, my leadership team and I will take a commensurate pay reduction for the duration of the strike,” the email adds.
The message comes several days after Boeing warned it was considering furloughs following the 13 September walkout by members of the International Association of Machinists (IAM).
The strike, still ongoing, forced Boeing to halt 737 production in Renton and 767 and 777 production in Everett, which has significantly dried up the company’s inbound flow of cash.
Financial analysts caution that Boeing could face a cash shortage if the strike lasts more than several weeks.
Ortberg’s message says employees affected by furloughs will “take one week of furlough every four weeks on a rolling basis for the duration of the strike. Your leaders will be in touch today to share more detail on your team’s specific approach”.
Furloughed staff will continue to receive employment benefits.
A 25% pay cut for Ortberg’s leadership team would be commensurate with the furlough schedule.
Boeing says tens of thousands of employees from across the company will be caught up in the furloughs. ”All activities critical to our safety, quality, customer support and key certification programmes will be prioritised and continue, including 787 production,” Ortberg adds.
“It is… an effort to preserve our long-term future and help us navigate through this very difficult time,” his email says. “With production paused across many key programmes in the Pacific Northwest, our business faces substantial challenges and it is important that we take difficult steps to preserve cash and ensure that Boeing is able to successfully recover.”
The company’s cash reserves have been the subject of concern since the strike began. Boeing ended June with cash and equivalents valued at $10.9 billion, which analysts view as roughly the amount Boeing needs to fund its operations. It could probably operate on less – but not much less, they say.
By some estimates, the strike is costing Boeing $1.5-3 billion monthly, meaning the company may need to raise more cash, either by selling stock or by issuing new debt. Meanwhile, corporate rating agencies are warning they might downgrade Boeing’s credit.
“We remain committed to resetting our relationship with our represented employees and continuing discussions with the union to reach a new agreement that is good for all of our teammates and our company as soon as possible,” Ortberg says.
IAM’s previous employment contract with Boeing expired on 12 September.
The union has been seeking a new contract providing 40% average pay increases, though Boeing had offered 25%, prompting workers to walk off the job. The union also seeks improved retirement and medical benefits.
Story updated on 18 September to include more detail about the furloughs.
