Boeing said it would cut 17,000 jobs, or 10% of its employees, due to the worsening financial condition.
The Financial Times and other media reported on the 12th that Kelly Ottberg, CEO of aircraft manufacturer Boeing, announced the job cuts to employees on the 11th (local time) and sent a message saying, “Our business is in a difficult situation and the problems we are facing cannot be overemphasized.” Boeing has 171,000 employees as of 2023.
Safety defects in aircraft manufactured by Boeing are affecting sales. In early January this year, a Boeing 737 Max plane took off in the United States and the wall of the fuselage fell off shortly after it took off. Earlier, there were accidents in 2018 and 2019. The Financial Times reported that U.S. regulators asked Boeing to slow down the production of the plane to improve quality, which also affected the reduction in cash inflow.
There are also ongoing strikes by Boeing workers. More than 33,000 Boeing workers began a strike on the 13th of last month for the first time in 16 years, demanding higher wages. Reuters reported that the strike has disrupted production of Boeing’s 737 MAX, 767 and 777 planes. Boeing announced that it is postponing the first delivery of its next-generation flagship aircraft, the 777X, with news of job cuts.
The company’s credit rating has also been turned on due to concerns over deteriorating financial conditions. Standard & Poor’s (S&P), an international credit rating agency, said on the 8th that it would put Boeing, whose credit rating is “BBB-,” on a “negative observation” list, citing the growing financial risk of the strike. If Boeing’s credit rating is lowered by one notch, it will be eligible for investment (junk) rating.
Boeing said its third-quarter earnings will “recognize” the impact of the strike, predicting losses in the industrial and defense sectors. According to Boeing’s third-quarter forecast data released before the announcement on the 23rd, its net loss per share, which was $2.90 in the second quarter, is expected to be greater in the third quarter. The estimated sales were $17.8 billion, and the estimated loss of operating cash flow was $1.3 billion. CEO Otberg said, “Our business is facing short-term challenges,” but added, “We are making important strategic decisions for the future and have a clear vision for what to do to restore it to its original state.”
JENNIFER KIM
US ASIA JOURNAL
