A historic series of cost-cutting measures at Boeing has left experts perplexed and wondering whether the aerospace giant, plagued by a month-long strike, is sacrificing its future.
“I'm not sure I see the bigger plan here,” Richard Aboulafia, a consultant at AeroDynamic, told AFP.
“Getting rid of a lot of talent when there is a serious talent shortage in aerospace doesn't seem like the smartest move,” he added.
The company announced a series of tightening measures and production delays on Friday as the strike by 33,000 workers has added to Boeing's litany of problems.
Boeing employees of the International Association of Machinists (IAM) and Aerospace Workers walked off their jobs on September 13 after overwhelmingly rejecting a contract offer.
Boeing plans to reduce its workforce by about 10 percent in the coming months. At the end of 2023, it employed nearly 171,000 people, including 41,000 outside the United States.
“There might be some fat in there, but the idea that there's 10 percent fat, I can't imagine in what universe that could be true,” Aboulafia said.
According to analysts at TD Cowen, the group is conducting a “strategic reset” to raise capital and fill its coffers with as much as $10 billion in the absence of aircraft deliveries.
Boeing has struggled after the 2018 and 2019 crashes (346 deaths in total) and the Covid-19 pandemic. The company's cash position is rapidly declining as the strike continues.
Despite negotiations that began in May and have intensified since mid-September, the disagreement between the IAM machinists' union and Boeing continues, with relations appearing to be at an all-time low.
Boeing withdrew its latest offer last week after a third round of government-mediated talks and filed an unfair labor practice charge with the federal labor agency (NLRB), following a similar union action in September.
– Need cash –
According to Melius Research, a fundraising effort would “strengthen Boeing's bargaining position” because it would remove the urgency of finding an agreement to restart production.
The direct financial impact of the strike's first month was $5 billion, including $3.26 billion for Boeing, according to Anderson Economic Group.
The rest included industry wage losses, suppliers, Boeing customers and the Seattle area, excluding those directly affected by the strike.
Another option to get fresh cash back is to sell non-strategic assets, noted TD Cowen, who identified a potential value of around $20 billion dollars.
Emirates airline boss Tim Clark told specialist website The Air Current: “Unless the company is able to raise funds… I see a looming investment rating downgrade with a Chapter 11 (bankruptcy procedure) looming on the horizon .”
Negotiations on wage increases are at a standstill. Boeing has gone from an increase of 25 percent to 30 percent in four years, while the union demands 40 percent.
The union also wants the reinstatement of a pension plan that was abolished in 2008, which is a non-starter for Boeing.
– Siege Mentality –
Melius Research suggested that the strike is not really a surprise as it is “a symptom of a larger problem.”
Employees feel that they have made many sacrifices for Boeing over the past twenty years.
Meanwhile, the group paid $68 billion to shareholders between 2010 and 2019 in the form of dividends and share buybacks.
Boeing also reported $5 billion in pre-tax costs in the third quarter – due to be published on October 23 – partly due to the strike and halt in production of the 767 Freighter.
The union insisted that “engineers were not the cause” of the job losses or the shutdown of the 767 program, stating that the strike was “a direct result of poor decision-making by Boeing executives.”
For its part, Boeing said: “We really want to reach an agreement that provides our employees with better pay and market-leading benefits,” accusing the IAM of making “misleading” statements.
Both sides are “preparing for a siege,” adviser Aboulafia said.
elm/arp/jgc
