Boeing CEO Kelly Ortberg announced Wednesday that the company will begin furloughing employees in an effort to conserve cash amid a union strike over a pay dispute.
In a message to staff, Ortberg said the company would begin furloughing “a large number” of employees, including executives and managers, to other U.S.-based staff, the Associated Press reported.
“While this is a tough decision that impacts everybody, it is in an effort to preserve our long-term future and help us navigate through this very difficult time,” Ortberg said in the the companywide memo.
Though Boeing has not disclosed an exact number, the furloughs are expected to affect tens of thousands of workers.
Under the furlough plan, workers must take one week off without pay every four weeks, though they will retain benefits. Senior executives, including Ortberg, will also take unspecified pay cuts during the strike.
Meanwhile, crucial operations such as safety, quality control, customer support and certification of new planes are expected to continue.
Boeing, which began the year with 171,000 employees, is facing severe cash flow issues as production stalls across its commercial airplanes division, particularly in the Pacific Northwest, where around 33,000 Boeing factory workers began a strike on Friday.
The workers, represented by the International Association of Machinists and Aerospace Workers (IAM), went on strike after rejecting an offer that included a 25 percent pay raise over four years. The union is pushing for a 40 percent increase, the reinstatement of traditional pension plans, and other benefits.
Newsweek reached out to Boeing via email and IAM via online form for comment.
Striking Boeing workerspicket outside the Boeing Co. manufacturing facility in Renton, Washington, on September 16. Boeing CEO Kelly Ortberg announced Wednesday that the company will begin furloughing employees.
YEHYUN KIM/AFP/Getty Images
Last week, Brian Bryant, the International President of IAM, issued a statement on the strike: “Our members’ rejection of Boeing’s contract was a resounding victory for the entire aerospace industry and workers’ rights. Boeing must now deliver a contract that respects their value and gives them the dignity they deserve.”
“The IAM stands firmly behind our members. Together, we will fight until Boeing offers a deal that our members will accept. Our strength lies in our unity, and we will not back down until they receive the compensation they have earned,” Bryant added.
The strike, which has shut down production of Boeing’s top-selling 737 Max, could significantly hurt the company’s finances as Boeing earns more than half a plane’s price upon delivery, meaning that ongoing delays could cripple cash flow.
Since the beginning of 2019, Boeing has lost over $25 billion, including $4.3 billion in the second quarter of 2024 alone, as the company braces for another year of financial losses.
In Wednesday’s memo to employees, Ortberg said that the company is talking to the IAM about a new contract agreement that could be ratified.
“However, 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 said.
It comes as negotiations between Boeing and IAM resumed Tuesday under the guidance of federal mediators, but the union expressed frustration with the progress in a website post addressed to members.
“The company was not prepared and was unwilling to address the issues you’ve made clear are essential for ending this strike: Wages and Pension,” the union said. “The company doesn’t seem to be taking mediation seriously.”
Wednesday’s announcement comes after Boeing Chief Financial Officer Brian West previously warned employees that the company would be making ten immediate cutbacks.
In a memo sent Monday, West said some of the cutbacks included a hiring freeze at all levels, halting pay raises for promotions, and restricting all nonessential travel.
“We are also considering the difficult step of temporary furloughs for many employees, managers and executives in the coming weeks,” West said.
This article includes reporting from the Associated Press.
