Boeing Furloughs Salaried Staff to Preserve Cash Amid Strike
(Bloomberg) -- Boeing Co. is requiring many salaried workers to take unpaid leave to preserve cash as the planemaker digs in for contentious contract talks with its largest union.
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The austerity measure affects tens of thousands of US-based employees, managers and executives, according to the company. They will work a rolling schedule of three weeks on the job and one week without work or pay, Kelly Ortberg, Boeing’s chief executive officer, announced Wednesday in a companywide message seen by Bloomberg. Ortberg and other senior executives will also take a pay cut while factory workers in Seattle and Oregon remain on strike, he said.
“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.
The measures underscore the financial squeeze on Boeing amid a showdown with its largest union, IAM District 751, which went on strike on Sept. 13. With work halted in Boeing’s main jetliner factories and losses mounting in its defense division, Boeing is facing a cash squeeze that has put its investment-grade rating at risk.
Highlighting the dire financial backdrop, Boeing said this week that it would initiate a series of cost cuts, including furloughs and reductions in its use of outside contractors.
Negotiations with the union are set to continue on Wednesday after a first round overseen by a mediator left the labor side “frustrated.” The company’s initial offer of a 25% pay increase over four years was resoundingly defeated by workers seeking higher raises and their pensions reinstated.
“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,” District 751 negotiators said in a statement late Tuesday.
Chief Financial Officer Brian West said Friday that the company is eager to resolve the stalemate that is eroding cash and threatening its financial recovery. Boeing slowed output this year to tackle quality lapses and supplier shortages brought to light by a near catastrophic accident on Jan. 5. That, in turn, has weighed heavily on its cash position, with the company burning through more than $8 billion in the first six months.
“We won’t take any actions that inhibit our ability to fully recover in the future,” Ortberg told employees on Wednesday. “All activities critical to our safety, quality, customer support and key certification programs will be prioritized and continue, including 787 production.”
Ortberg has closely monitored the negotiations, making a point about being present on the factory floor in recent days and sending out memos laying out Boeing’s point of view. The CEO, who took over early last month, didn’t attend Tuesday’s talks, according to the union.
(Updates with furlough details from the first paragraph.)
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