Boeing freezes hiring, considers furloughs


Costly action: Workers picket outside a Boeing facility in Everett, Washington. The company halted manufacturing across its Seattle hub and experts warn it could lose about US$500mil in cash each week that workers remain on strike. — Bloomberg

NEW YORK: Boeing Co says it’s instituting a range of cost-cutting measures as the planemaker prepares for a drawn-out and expensive strike by workers at its main hub near Seattle, including a hiring freeze and temporary furloughs “for many employees”.

Chief financial officer Brian West laid out the steps in a memo to employees shared with Bloomberg News, in which he informed workers of the necessary and “immediate” actions to support the company’s recovery.

The sweeping measures also include a halt of non-essential travel, pausing any pay increase associated with promotions, cutting back outlays for air shows and charitable donations and “significant reductions in supplier expenditures”.

The planemaker will stop issuing “a majority” of its supplier purchase orders for the 737, 767 and 777 jetliner programmes affected by the walkout, according to the memo.

“Our business is in a difficult period,” West said in the memo. “This strike jeopardises our recovery in a significant way and we must take necessary action to preserve cash and safeguard our shared future.”

Roughly 33,000 workers represented by the International Association of Machinists and Aerospace Workers brought Boeing’s jetliner factories in the Puget Sound region to a standstill last week after they overwhelmingly rejected a proposal that would have boosted wages 25% over four years.

The two sides plan to meet again this week to try to hammer out a new agreement, with union leadership warning that a strike could go on for a while.

The steps laid out by West underscore the difficult financial position in which Boeing finds itself, with its credit rating at risk of dropping below investment grade and the company bleeding cash as aircraft output sputters.

RBC Capital Markets analyst Ken Herbert estimated Boeing will burn about US$500mil in cash each week that workers remain on picket lines.

Other actions that Boeing will undertake include the elimination of first and business-class travel, including for senior executives, releasing non-essential contractors and pausing team-event spending, according to the memo.

Boeing’s shares fell 1.5% in New York.

Preserving its credit rating is a key priority for the company, West said at an analyst conference last week.

Boeing has been in crisis since a Jan 5 accident with a 737 Max aircraft forced the company to cut back output to get its manufacturing in order.

S&P Global Ratings on Monday said it could lower Boeing’s credit rating below investment grade should the planemaker suffer an extended strike, echoing similar comments made last week by Fitch Ratings and Moody’s Ratings.

The latter placed the planemaker on review for downgrade on Friday.

S&P said a shorter walkout of several weeks “would likely be manageable for Boeing and not lead to a negative rating action. However, we believe an extended strike would be costly and difficult to absorb, given the company’s already strained financial position”.

Boeing’s credit rating at all three of the major graders sits one level above junk.

For its US$58bil debt pile, to leave the investment-grade index and move to speculative grade, two of the three rating firms would need to lower its score.

Financing debt in junk markets is more difficult than in high-grade.

The average interest payments are much higher and the pool of potential investors smaller, making refinancing more costly.

The company has US$4bil of debt coming due in 2025 and also US$8bil coming due in 2026, according to Moody’s.

The planemaker is evaluating its capital structure to ensure it can meet its upcoming debt payments over the next 18 months, West said last week. — Bloomberg

Follow us on our official WhatsApp channel for breaking news alerts and key updates!
   

Next In Business News

Kunal Sinha to host branding workshop in KL on November 6-7
OCBC Bank offers energy calculation tool to help SMEs access green loans
Goldman Sachs raises China's GDP forecast to 4.9% in 2024
Foreign investors remain in selling mode on Bursa Malaysia
US Customs lifts import ban on Malaysia’s Brightway gloves
Singapore keeps monetary policy unchanged as growth picks up pace in Q3
Singapore Q3 GDP up 4.1% y/y, preliminary data shows
FBM KLCI surges in early trade on pre-budget rally
Ringgit rises against US dollar on Budget 2025 outlook
Trading ideas: WMG, Glostrext, Fajarbaru, Gadang, Sunway REIT, Pharmaniaga

Others Also Read