Boeing shares (BA ) fell 2%.
“Our business is in a difficult position, and the challenges we face together cannot be overstated,” CEO Kelly Ortberg said in a message to employees posted on Boeing’s website. ” he said. “Beyond navigating the current environment, rebuilding the company will require difficult decisions and structural changes that will enable us to remain competitive and serve our customers over the long term.”
He added that the job cuts also include executives, managers and employees. Boeing had approximately 171,000 employees as of December 2023, according to SEC filings.
“There are aircraft manufacturers that are in very deep trouble. What they’ve done here is not training,” Mike Boyd, president of aviation consulting firm Boyd Group International, said in response to the layoff announcement. told Yahoo Finance on Friday.
The ongoing strike by Boeing’s largest labor union, the International Association of Machinists and Aerospace Workers (IAM), has proven costly for the company on a number of fronts.
The shutdown has disrupted the company’s recovery efforts, including ramping up production of its best-selling 737 Max jet from about 25 a month in June and July to 38 a month by the end of the year. Included.
S&P Global estimates that the strike will cost the company about $1 billion per month, after taking into account cost-cutting measures taken by the company in response to the strike.
Earlier this week, credit rating agencies placed Boeing on CreditWatch Negative, raising the possibility of a downgrade if the shutdown continues through the end of the year. Increased credit risk makes it more difficult and expensive for businesses to borrow money.
S&P expects Boeing to suffer a cash outflow of about $10 billion in 2024.
As a result, Wall Street analysts expect Boeing to need to raise cash through an initial public offering. At the end of the second quarter, Boeing had approximately $58 billion in total debt and $12.6 billion in cash.
“Based on conversations with investors, it’s no surprise that Boeing is considering a capital increase. Most investors believe that the company has raised more than $10 billion, perhaps following the end of the machinists’ strike. I think we expected it to raise,” JPMorgan analyst Seth Seifman and his team wrote in a recent note.
Analysts say the amount raised could depend on how long the strike lasts, and investors may be reluctant to sign on if the strike is still underway.
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The company took a tougher stance on the union earlier in the week after this week’s breakdown in negotiations left little hope for a quick resolution to the strike.
On Thursday, the aircraft manufacturer filed an unfair labor practice complaint against IAM representatives.
Boeing announced in a statement this week that as a result of the mediation, the company further improved on its previous proposals, but that “the union has not seriously considered these proposals and continues to assert unreasonable demands.”
Boeing said in a statement: “The union’s public rhetoric is misleading and makes it difficult for our employees to find solutions. We remain committed to reaching a compromise to end the strike.” said.
The move comes days after negotiations involving a mediator broke down and the aircraft maker withdrew its contract offer on Tuesday.
IAM did not respond to requests for comment.
“This is just a move by (Boeing) to apply pressure. But like most strikes…it will end with them coming back to the table and resolving it,” said the New York City-based employment lawyer. Nicole Brenneke told Yahoo. finance.
The union members resigned on September 13 after rejecting the tentative contract. After a third round of negotiations broke down on Tuesday, the union announced that Boeing rejected offers to raise wages, provide vacation and sick leave, and had no intention of restoring pension benefits.
IAM is planning a rally on Tuesday.
Boeing stock has fallen about 40% since the beginning of the year.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow @ines_ferre on X.
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