Boeing has been facing significant turmoil recently, grappling with workforce reductions and production challenges amid financial losses. The aerospace giant, which has been struggling to stabilize operations after a lengthy machinists' strike, is now evaluating tough decisions to align its workforce with necessary operational changes.
After weeks of negotiations, the International Association of Machinists and Aerospace Workers voted 59% in favor of accepting a new collective bargaining agreement, thereby ending the 52-day walkout on November 4. Following the strike's conclusion, approximately 33,000 machinists resumed work on November 12. Yet, even with workers back on the job, the uncertainty surrounding Boeing's financial status looms large.
CEO Kelly Ortberg has revealed plans to reduce the global workforce by 10%, examining various avenues to regain financial stability after Boeing endured staggering losses, including $6 billion last quarter alone. Layoff notices will be issued across the board, significantly impacting non-production roles within the company. The Society of Professional Engineering Employees in Aerospace has noted layoffs will also touch engineering teams, particularly those involved with military aircraft programs.
Boeing's struggle isn’t just limited to workforce issues; the company’s aircraft deliveries also tell a troubling story. Recent reports show Boeing delivered only 14 commercial planes in October, sharply down from 34 deliveries during the same month the previous year. This represented the lowest number of deliveries since November 2020, exacerbated by the recent strike and pre-existing supply-chain disturbances.
Compounding the pressure on Boeing are allegations of quality control issues. The airline's commercial and defense units continue to report severe financial losses, prompting concerns about the overall stability of its operations. There have been lawsuits from Alaska Airlines and other customers alleging manufacturing failures related to the 737 MAX, along with continuing scrutiny from federal regulators following fatal accidents involving earlier models of the 737.
Heading back to specific aircraft production, various issues have hindered Boeing’s ability to ramp up work across multiple lines, including the 737 MAX, 767F, and 777X lines. Ortberg clarified the company’s return to full-scale production would take weeks, with staff needing retraining and re-certification due to the lengthy stoppage. "It will be several weeks before we fully restart airplane production as we take the necessary steps to reactivate in full compliance with our Safety Management System,' Ortberg stated.
While the production lines were idled, some employees were furloughed, and pay increases were suspended as part of Boeing's effort to cut costs. Despite these measures, the overall outlook remains grim as Boeing reevaluates its financial priorities. The company has already raised approximately $24 billion to shore up its finances, potentially allowing some flexibility for its troubled production lines.
Significant challenges lie ahead not only for Boeing but for its suppliers, including Spirit AeroSystems, which faced severe liquidity issues reported as of November 5. The supplier warned there was 'substantial doubt' about its ability to continue operations without financial restructuring. Spirit's struggles cascaded throughout Boeing's supply chain, making effective management from the top down even more pivotal.
Intense competition from Airbus adds another layer of difficulty, particularly as the European company ramps up production and expands its order book, outperforming Boeing with hundreds of deliveries and new contracts. With the global aviation market slowly recovering from the pandemic and the chaotic upheaval resulting from supply chain shortages, stability and progression are necessary for Boeing's sustained presence and future successes.
Moving forward, Boeing leads with caution, aiming to streamline operations without compromising safety and quality. Efforts are underway to navigate the intricacies of the aerospace market, keeping employee morale up during this uncertain period. It is evident Boeing’s leadership recognizes the need for precision and careful planning to re-establish itself firmly within the industry, potentially transforming this moment of crisis to their advantage.
