Boeing announced on Friday its plan to reduce its workforce by approximately 17,000 employees, which accounts for about 10% of its total staff, and will cease production of a cargo aircraft manufactured in Washington state.
This decision follows nearly a month of strikes by aircraft machinists in the Puget Sound area and other West Coast locations, who rejected a contract proposal from Boeing in September. Negotiations have stagnated, resulting in halted manufacturing operations at Boeing’s facilities throughout the region.
Prior to the strike, Boeing was already grappling with financial difficulties and increasing debt levels.
“We need to be clear-minded about the challenges ahead and realistic about the time required to reach critical milestones towards recovery,” said Boeing President and CEO Kelly Ortberg in a communication to employees.
Ortberg emphasized the need to concentrate company resources on essential areas of innovation and performance instead of spreading efforts too widely. He noted that the layoffs would unfold “over the coming months” and would impact executives, managers, and staff members alike.
In conjunction with the workforce cuts, Boeing plans to halt the production of its 767 commercial freighter by 2027 after fulfilling existing orders for the aircraft, which is built in Everett. Furthermore, the aircraft manufacturer will postpone its 777X program, with initial deliveries now projected for 2026, also produced in Everett.
This week, around 30 members of Congress, including Democratic U.S. Representative Pramila Jayapal of Washington, sent a letter urging Ortberg and Jon Holden, president of the International Association of Machinists Local 751, to “bargain in good faith to reach a fair contract promptly.” They pointed out that Boeing’s CEO received total compensation exceeding $32 million in 2023, highlighting Ortberg’s appointment as CEO in August.
Contract discussions with the International Association of Machinists and Aerospace Workers have been ongoing with the assistance of a federal mediator since about 33,000 workers initiated their strike last month.
Boeing had proposed a new offer on September 23, which would have increased wages by 30% over the next four years, doubled a ratification bonus to $6,000, reinstated an annual bonus, and matched 401(k) contributions at 100% up to 8% of pay. However, the company announced on Tuesday that it had retracted this offer, stating that “further negotiations do not make sense at this point.”
The union is advocating for a 40% salary increase and the reinstatement of a defined-benefit pension plan.
Boeing has also faced intensified scrutiny regarding its safety protocols. Earlier this year, a door plug malfunction occurred on a 737 Max, and the company has incurred hundreds of millions of dollars in fines linked to fatal crashes in 2018 and 2019.
The aerospace company reported a quarterly loss exceeding $1.4 billion in the second quarter of the year, with its debt rising from $48 billion to nearly $58 billion during the same period.
On Friday, Boeing indicated it anticipates recognizing pretax expenses of $3 billion tied to the 777X and 767 programs, in addition to $2 billion related to its defense, space, and security sectors. The company expects third-quarter revenue to reach $17.8 billion, with a negative operating cash flow of $1.3 billion, and will release full third-quarter financial results on October 23.
The ongoing strike has affected numerous facilities across the Northwest, including locations in Renton, Everett, Auburn, and Frederickson in Washington, as well as Gresham and Portland in Oregon. As a result of the strike, production on various commercial airplane models, such as the 737 Max, 767, and 777, along with some military aircraft, has been suspended.
Last month, Ortberg announced temporary furloughs for employees, including upper management, to conserve cash during the strike. In his message on Friday, he stated that, due to the impending layoffs, the company would not move forward with the planned next cycle of furloughs.
“The current state of our business and our path to recovery necessitate difficult decisions,” he concluded.