Boeing Co. BA has started temporary furloughs for thousands of employees as it grapples with the financial impact of a machinists union strike.
What Happened: In a memo to employees, Boeing CEO Kelly Ortberg stated that the furloughs, affecting U.S.-based executives, managers, and employees, will occur one week out of every four until the strike concludes. Ortberg and his leadership team will also take pay cuts, The Washington Post reported on Wednesday.
"With production paused across many key programs in the Pacific Northwest, our business faces substantial challenges and it is important that we take difficult steps to preserve cash and ensure that Boeing is able to successfully recover," Ortberg stated.
The strike, initiated by the 33,000-member International Association of Machinists and Aerospace Workers, began after rejecting Boeing’s offer. The union demands a 40% pay increase and the reinstatement of a pension program.
Despite the furloughs, work critical to quality, customer support, and key certification programs will continue. Production of the 787 jet in South Carolina remains unaffected.
Analysts estimate the strike could cost Boeing $1 billion weekly. The company could burn through $3.5 billion in cash if the strike extends through September, according to Bloomberg Intelligence.
Boeing’s financial measures include a hiring freeze, reduced capital and supplier spending, and an end to nonessential travel. The strike is the first by Boeing machinists in 16 years, according to the report.
Why It Matters: The strike’s origins trace back to Saturday, when over 30,000 workers walked off the job after rejecting Boeing’s offer of a 25% wage increase over four years. Union leader Jon Holden emphasized the workers’ resolve, stating, “They're standing shoulder to shoulder and they're ready. So it (the strike) could go on for a while.”
Subsequently, Boeing and the union returned to the negotiating table with federal mediators on Wednesday. The talks aim to resolve the wage and pension disputes that triggered the strike. The union’s demand for a 40% wage hike starkly contrasts with Boeing’s 25% offer.
Adding to the complexity, Elon Musk recently criticized the Federal Aviation Administration for allegedly favoring Boeing over SpaceX in regulatory matters.
Price Action: Boeing Co. closed at $155.11 on Wednesday, down 0.82% for the day. In after-hours trading, the stock gained 0.38%. Year to date, Boeing’s stock has dropped by 38.39%, according to data from Benzinga Pro.
Read Next:
Image Via Shutterstock
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
