Boeing furloughs tens of thousands of employees with strike talks stalled

WASHINGTON – Boeing will temporarily furlough tens of thousands of employees after about 30,000 machinists went on strike on Sept 13, halting production of its 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,” Boeing chief executive Kelly Ortberg said on Sept 18 in an e-mail 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.”

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

The extensive furloughs – mandatory unpaid leave of absence – show Mr 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.

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.

Boeing and the International Association of Machinists and Aerospace Workers held two days of discussions in the presence of federal mediators. The union, which said on Sept 17 it was frustrated with the first day of mediation, said late on Sept 18 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 said. “We are fully committed to fighting for the contract our members deserve.”

A protracted labour battle could cost Boeing several billion 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 Mr 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.

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

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

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

Production halts

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

A major Chinese lessor, however, said it placed a fresh order on Sept 18 for 50 Max jets for delivery from 2028 to 2031, in a sign that longer-term demand for Boeing planes remains intact.

Boeing said on Sept 15 it was freezing hiring to cut costs as its balance sheet is already burdened with US$60 billion (S$77.6 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 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 in 2024. REUTERS