Boeing will cut 17,000 jobs in bid to slash costs

Boeing’s new chief executive on Friday announced plans to reduce its workforce by 10%, or about 17,000 jobs, as he seeks to restructure the company in an effort to slash costs and improve production of planes, which has been plagued by numerous delays.

Kelly Ortberg, who became CEO in August, told employees in a memo that Boeing, which last reported an annual profit in 2018, faced big problems and needed to change how it did business in ways that play to its strengths.

The announcement on Friday comes as the company deals with a costly and disruptive strike that began nearly a month ago, when members of its largest union rejected a contract offer and walked off the job. The union, the International Association of Machinists and Aerospace Workers, represents more than 33,000 Boeing employees.

Boeing on Friday also reported $5 billion in new costs associated with several commercial and defense programs.

“Our business is in a difficult position, and it is hard to overstate the challenges we face together,” Ortberg said. “Beyond navigating our current environment, restoring our company requires tough decisions and we will have to make structural changes to ensure we can stay competitive and deliver for our customers over the long term.”

The cuts, which will include layoffs and not filling positions as employees leave, amount to a 10% reduction of Boeing’s 170,000 employees. Ortberg said that the cuts will be implemented across the company, affecting executives, managers and production workers.

Boeing announced a similarly large percentage cut in April 2020, when air travel fell about 90% as the coronavirus pandemic took hold. At the end of that year, Boeing employed 141,000.

Ortberg, a former top executive at Rockwell Collins, a major aerospace supplier, said Boeing would also change its product lineup and adjust its schedule for selling new jets. It will do away with the 767 freighter, an older model, after fulfilling more than two dozen outstanding orders. He also confirmed that the company would deliver its first 777X, a large plane designed for international travel that has been delayed repeatedly, in 2026, a year later than had previously been expected. When Boeing started the 777X program, in 2013, it slated the first delivery for 2020.

Ortberg also said that he expected additional losses from a handful of already-costly defense products that Boeing had agreed to build at a fixed price. Those programs have weighed heavily on the company’s finances in recent years, as supply chain challenges mounted and prices rose rapidly.

“We will refocus our company, and we will restore trust with all those who depend on us,” he said.

The job cuts announced on Friday seem to reflect a desire to sharpen the company’s focus, said Kevin Michaels, a managing director of AeroDynamic Advisory, an aerospace consulting firm.

“There must be a sense that they need some trimming to align the workforce with the real business they have in front of them,” Michaels said.

Boeing said that the 777X delay and the decision to end production of the 767 would result in $2 billion in costs. The fixed-price defense programs will add $3 billion in costs. The company said those estimates include the impact of the strike, which has all but stopped production of many Boeing commercial airplanes.

The company on Friday also previewed its quarterly financial results, which it is scheduled to share fully later this month. Boeing expects to report $17.8 billion in revenue and a nearly $10 loss per share.

This week, S&P Global Ratings said it was considering lowering Boeing’s credit rating to junk status depending on how long the strike lasts. Such a downgrade would increase the company’s cost of borrowing, dealing another blow to its financial position. Boeing has about $58 billion in debt, up from $9 billion a decade ago.

Ortberg’s appointment was part of a management shake-up in response to a crisis that began when a door panel blew off a Boeing 737 Max 9 during an Alaska Airlines flight in January. That episode renewed concerns about the quality and safety of Boeing’s planes several years after two fatal crashes involving the Max 8, a smaller version of the jet.

In response, the Federal Aviation Administration limited production of all Max planes until it was convinced that the company had made sufficient quality improvements. Boeing has changed practices and increased training and oversight.

Talks between the company and the machinists’ union broke down this week, with Boeing retracting its latest contract offer and the two sides accusing one another of refusing to compromise. The strike is costing Boeing tens of millions of dollars a day.

Workers are seeking a 40% wage increase, restoration of a frozen pension and other changes. Many say they have grown frustrated by rising costs in the Seattle area and by company policies. They are also drawing inspiration from the success unions in other industries have seen in negotiations in recent years.

This article originally appeared in The New York Times.

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