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Boeing announced sweeping cost cuts Monday, including a hiring freeze, a pause on nonessential staff travel and a reduction on supplier spending to preserve cash as it deals with a strike by more than 30,000 factory workers.
Boeing factory workers, mostly in the Seattle area, started walking off the job early Friday after overwhelmingly rejecting a tentative labor deal, halting most of Boeing’s aircraft production.
The manufacturer will make “significant reductions” to supplier spending and stop most purchase orders for its 737 Max, 767 and 777 jetliners, CFO Brian West said in a note to staff. It was the first clear sign of how the strike will affect the hundreds of suppliers that rely on Boeing work.
“We are working in good faith to reach a new contract agreement that reflects their feedback and enables operations to resume,” West said in his note. “However, our business is in a difficult period. This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future.”
He added that Boeing is not making cuts to funding for safety, quality and direct customer support work.
The financial impact of the strike will depend on how long it lasts, but Boeing is focused on conserving cash, West said at a Morgan Stanley conference Friday. He said the company’s new CEO, Kelly Ortberg, wants to get back to the bargaining table right away to reach a new deal.
“We are also considering the difficult step of temporary furloughs for many employees, managers and executives in the coming weeks,” West said.
On Friday, Moody’s put all of Boeing’s credit ratings on review for a downgrade and Fitch Ratings said a prolonged strike could put Boeing at risk of a downgrade. That could drive up the borrowing costs of a manufacturer that already has mounting debt.
Boeing burned about $8 billion in the first half of the year as production slowed in the wake of a near-catastrophic door-panel blowout at the start of the year.