Boeing furloughs thousands as no progress made to resolve strike

BOEING said on Wednesday (Sep 18) that it will temporarily furlough tens of thousands of employees after about 30,000 machinists went on strike last Friday, halting production of its best-selling 737 MAX and other airplanes.

“We are initiating temporary furloughs over the coming days that will impact a large number of US-based executives, managers and employees,” CEO Kelly Ortberg said in an email to employees. “We are planning for selected employees to take one week of furlough every four weeks on a rolling basis for the duration of the strike.”

The strike, Boeing’s first since 2008, adds to a tumultuous year for the planemaker which began when a door panel blew off a new 737 MAX jet in mid-air in January.

Ortberg also said that he and other Boeing leaders “will take a commensurate pay reduction for the duration of the strike”.

Boeing and the International Association of Machinists and Aerospace Workers (IAM) held two days of discussions in the presence of federal mediators. The union, which said on Tuesday that it was frustrated with the first day of mediation, said late on Wednesday that it had concluded another day of talks with “no meaningful progress”.

“While we remain open to further discussions, whether directly or through mediation, currently, there are no additional dates scheduled,” the union added. “We are fully committed to fighting for the contract our members deserve.”

Boeing did not immediately respond to a request for comment on the IAM statement.

The extensive furloughs show Ortberg is preparing the company to weather a prolonged strike that is not likely to be easily resolved given the anger among rank-and-file workers.

A protracted labour battle could cost Boeing several billion US dollars, further straining finances and threatening its credit rating, analysts said.

“It’s unlikely that the cuts will fully offset the costs of a prolonged strike,” said Ben Tsocanos, aerospace director at S&P Global Ratings.

The union has been pushing for a 40 per cent raise over four years in its first full contract negotiations with Boeing in 16 years, well above the planemaker’s offer of 25 per cent, which was resoundingly rejected.

Brian Bryant, the IAM’s international president, said that actions like furloughs and the cutback in salaries amounted to “smoke and mirrors”, given earlier company spending on bonuses and compensation for top executives.

“This is just part of their plan to make it look like they’re trying to save money,” explained Bryant, who was in the Seattle area picketing on Wednesday with the “resilient” membership.

“The ball is in Boeing’s court. They could settle this strike tomorrow,” Bryant noted, adding it would take fair pay, pension, restoring a bonus and health insurance.

In the email to employees, Ortberg said that the company would not take any “actions that inhibit our ability to fully recover in the future. All activities critical to our safety, quality, customer support and key certification programmes will be prioritised and continue, including 787 production”.

The company employs about 150,000 people in the US. It is unclear exactly which employees are affected by the furloughs. A union representing Boeing’s engineers said their members were not affected.

The strike, now six days old, also carries risks for the company’s vast network of suppliers, some of whom are also considering furloughs, several told Reuters.

“Certainly suppliers are worried,” said Nikki Malcom, CEO of the Pacific Northwest Aerospace Alliance. “It’s going to have a significant impact on suppliers if it goes on a long time.”

Production halts

The strike has halted production of Boeing’s 737 MAX narrow-body jets, along with its 777 and 767 wide-body aircraft, delaying deliveries to airlines.

A major Chinese lessor, however, said that it placed a fresh order on Wednesday for 50 MAX jets for delivery from 2028 to 2031, in a sign that longer-term demand for Boeing planes remains intact.

The manufacturer said on Monday that it was freezing hiring to cut costs as its balance sheet is already burdened with US$60 billion of debt.

The company has also stopped placing most orders for parts for all Boeing jet programmes except the 787 Dreamliner, in a move that will hurt its suppliers.

One senior supplier dismissed the latest announcement as “panic mode” and said that it underscored Boeing’s lack of room to manoeuvre due to its already-strained balance sheet. “They would be better to settle; they are getting very near the precipice,” said the supplier, who asked not to be named.

Boeing shares have fallen about 40 per cent so far this year. REUTERS