This came according to what was published by the “Bloomberg” website, which continued that the company plans to reduce its global workforce by about 10%, and announced fees worth $5 billion across its commercial aircraft and defense businesses in the third quarter of this year, which highlights the severity of the financial problems that it faces. The aircraft giant is facing it, amid a crippling labor strike.
CEO Kelly Ortberg told employees in a memo Friday that the cuts translate into nearly 17,000 jobs, which will include executives, managers and employees. The company also plans to delay the launch of its first 777X jet, as the company separately announced that it expects third-quarter sales to be much lower than Wall Street estimates.
Ortberg continued in his note: “Our business is in a difficult situation, and it is difficult to overstate the challenges we face together. “Recovering our company requires making difficult decisions, and we will have to make structural changes to ensure our ability to remain competitive and provide our services to our customers in the long term.”
In turn, Jefferies analyst Sheila Kahyoglu said in a note to clients on Friday that assuming the average annual salary is $100,000, job cuts could save about $1.7 billion in earnings before interest and taxes. This would also serve as a potential warning to other aircraft and aerospace manufacturers.
“Workforce reductions are what we saw at smaller suppliers earlier this week, indicating further cuts in the industry,” Kahyaoglu continued.
The ads highlight the huge task facing Ortberg as he tries to turn around the struggling aircraft and defense manufacturer. Boeing revealed its latest cost-cutting measures and preliminary financial results as it seeks to break the impasse with the International Association of Machinists and Aviation Workers. The talks collapsed earlier this week, with no clear path on when and how they could resume.
Boeing has made two offers to increase wages, while the union representing hourly factory workers across the West Coast has rejected both offers, while about 33,000 employees have been on strike for a month now, destroying production and depleting Boeing’s reserves.
In response to Boeing’s announcement, the International Association of Aerospace and Machinists pledged to continue its industrial work.
The company said in a statement: “The path to resolving this strike begins at the negotiating table.” Not wanting to remain at the table will only prolong the strike. “CEO Ortberg has the opportunity to do things differently instead of the same old, exhausting threats about labor relations.”
Shares of the aircraft manufacturer fell by 1.6% in after-hours trading yesterday, Friday, and the stock fell by about 42% this year until the close.
Preliminary results
The company expects to achieve revenues in the third quarter of $17.8 billion, which is less than the $18.6 billion that Wall Street expected, according to the average estimates of analysts compiled by Bloomberg. The company also expects a net loss of $9.97 per share according to generally accepted accounting principles, based on preliminary numbers released on Friday.
The company said operating cash flows are expected to be $1.3 billion, which means it has cash and investments in marketable securities worth $10.5 billion at the end of the period. The company is scheduled to announce its full results on October 23.
Jefferies’ Kahyaoglu said that preliminary numbers indicate that Boeing will see free cash flows of $1.8 billion during the period ending September 30, which is better than the $3 billion in cash burn that it expected, indicating that the liquidity crisis that… What Boeing faces may not be as dire as some expected.
Boeing expects the results to include about $5 billion in pre-tax charges across its two main business divisions. About $2.6 billion of this amount is due to delaying the launch of the last wide-body 777X aircraft. In this regard, Ortberg said that the company notified customers that the first deliveries of the aircraft will not begin before 2026, pointing to the cessation of ongoing work and flight tests.
It is the latest setback for the jet, which is already five years behind schedule for FAA certification. In August, Boeing announced that it had suspended tests due to a crack in a key component known as the thrust link that helps connect the plane’s massive General Electric engines to the plane’s wings.
Boeing said deliveries of the initial 777X freighters will also be delayed until 2028. Overall, the commercial aircraft business will record a charge of $3 billion as production of the 767 program closes in 2027, after the remaining ordered aircraft are built.
Boeing said that the defense and space sector will also record a pre-tax charge of $2 billion. In September, Ortberg ousted the sector’s head, Ted Colbert, amid rising costs due to faltering performance in new development programs as well as an improved version of the F-15 fighter jet.
Boeing has already begun implementing a set of cost-cutting plans as it struggles with dwindling reserves and declining production. The company granted some workers temporary leave, froze hiring, and reduced travel expenses at the company’s expense.
Ortberg said the company will not go ahead with the next round of unpaid furloughs as part of its job cuts plan, while the current round of unpaid furloughs is scheduled to end in late October.
Source: Bloomberg
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