A top Boeing executive has announced that the plane maker is freezing hiring, halting nonessential spending, and considering layoffs as it faces a prolonged strike by thousands of machinists.
The measures are intended to conserve cash and protect the company’s long-term operations during the strike, according to an internal memo from Brian West, Boeing executive vice president and chief financial officer. He said the company is going through 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,” West wrote. “Importantly, we will protect all funding for safety, quality, and direct customer support work.”
Last week, union members rejected what Boeing called a “historic” contract offer, which included an 11 percent wage increase, enhanced retirement benefits, job security safeguards, and reduced mandatory overtime.
The striking machinists are demanding better wages, improved health care plans, a stronger retirement program, and more control over mandatory overtime.
“We want the company to take our proposals seriously and bargain earnestly,” Jon Holden, IAM District 751 president and directing business representative, said in a statement last week.
In his memo, West said that Boeing has taken note of the union members’ demands.
“We are working in good faith to reach a new contract agreement that reflects their feedback and enables operations to resume,” he wrote.
The strike has put a strain on Boeing’s operations, prompting West to announce a series of cost-cutting measures. In his memo, West outlined immediate actions, including a hiring freeze, the suspension of all noncritical travel and capital expenditures, and the elimination of first-class and business-class air travel for Boeing executives.
Boeing will also temporarily release nonessential contractors and consultants, and pause employee retention programs, catered meals, and team events, according to West’s memo.
The aircraft manufacturer is also planning “significant reductions” in supplier expenditures and will halt the majority of new supplier purchase orders for the 737, 767, and 777 jetliner programs. Further reductions in spending could affect the company’s involvement in airshows, marketing events, and charitable contributions.
West noted, however, that Boeing is not making any cuts in funding to safety, quality, and direct customer support work.
“We are also considering the difficult step of temporary furloughs for many employees, managers, and executives in the coming weeks,” he wrote.
“I know that these actions will create some uncertainty and concern, as well as many questions.”
The company will share additional details in the coming days, including how Boeing will be implementing the measures, West wrote.
The strike comes at a challenging time for Boeing, which has been trying to ramp up production after a series of safety incidents and increased regulatory scrutiny in recent years. Analysts warn that the strike could have lasting financial effects if it drags on. Credit-rating agencies Fitch and Moody’s have joined S&P Global in warning that a prolonged strike could lead to a ratings downgrade.
“If the current strike lasts a week or two, it is unlikely to pressure the rating. However, an extended strike could have a meaningful operational and financial impact, increasing the risk of a downgrade,” Fitch Ratings said in a statement on Sept. 13.
