Boeing starts furloughing tens of thousands of employees amid machinist strike

Boeing will temporarily furlough thousands of U.S. executives, managers and other staff, citing the ongoing machinist strike as the company races to preserve cash, CEO Kelly Ortberg told employees Wednesday.

The furloughs will affect tens of thousands of Boeing employees, a company spokesperson said.

The plan came less than a week after Boeing’s more than 30,000 machinists in the Seattle area and Oregon overwhelmingly voted down a new labor contract and 96% voted to strike, walking off the job just after midnight on Friday.

Negotiations between the two sides continued this week with a mediator. Boeing had offered a 25% raise and the union endorsed the tentative contract. But some workers told CNBC that the contract offer was rejected because the raises weren’t sufficient enough to match the increase in the cost of living in the Seattle area and it didn’t restore their pensions.

“We will not mince words – after a full day of mediation, we are frustrated,” the union said in a statement Tuesday.

Ortberg, who has been in the job for just under six weeks, said in a staff memo that affected employees would take one week of furlough every four weeks for the strike’s duration and he and his team would take “commensurate” pay cuts during the strike.

“While this is a tough decision that impacts everybody, it is in an effort to preserve our long-term future and help us navigate through this very difficult time. We will continue to transparently communicate as this dynamic situation evolves and do all we can to limit this hardship,” Ortberg said in his message.

Boeing’s CFO, Brian West, earlier this week said the company would freeze hiring and raises to cut costs, and would let “non-essential contractors” go temporarily.

The financial impact of the strike will depend how long it lasts, West said, but it adds to pressure on Boeing’s leaders, who are trying to move the company past safety and quality crises, including the fallout from a near-catastrophic door plug blowout in January, and $60 billion in debt.

Ortberg said that “activities critical to our safety, quality, customer support and key certification programs will be prioritized and continue” including production of its 787 Dreamliners, which are made in a nonunion facility in South Carolina.