Boeing’s CEO said Wednesday that the company will begin furloughing “a large number” of employees to save money during the pandemic. unionized machinists’ strike that began last week.
Chief Executive Kelly Ortberg said those who would be required to take unpaid leave starting in the coming days include executives, managers and other U.S.-based employees.
“While this is a difficult decision that affects everyone, it is intended to safeguard our long-term future and help us navigate this very challenging time,” Ortberg said in a company-wide message to staff.
Boeing has not said how many people will be furloughed, but the number is expected to reach into the tens of thousands. The aerospace giant had 171,000 employees at the start of the year.
About 33,000 workers at Boeing plants in the Pacific Northwest went on strike Friday after rejecting a proposed 25 percent pay increase over four years. They are demanding raises of at least 40 percent, a return to a traditional pension plan and other improvements in the contract offer they rejected.
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The strike is halting production of several aircraft models, including Boeing’s best-selling 737 Max. The company collects more than half the purchase price when new planes are delivered to buyers, so the strike will quickly hurt Boeing’s cash flow.
Ortberg said some employees will be furloughed for one week every four weeks while retaining their benefits. The CEO and other senior executives will take pay cuts for the duration of the strike, he said, without specifying the extent of the cuts.
All work related to safety, quality, customer support and certification of new aircraft will continue during the furloughs, he said, including production of the 787 Dreamliner jets, which are built by nonunion workers in South Carolina.
Ortberg said in a memo to employees that the company is talking to the International Association of Machinists and Aerospace Workers about a new contract agreement that could be ratified.
“However, with production interrupted on many key programs in the Pacific Northwest, our business faces significant challenges and it is important that we take tough actions to preserve cash and ensure Boeing is able to successfully recover,” he said.
Boeing’s chief financial officer warned employees earlier this week that temporary layoffs were possible.
The company, which is based in Arlington, Virginia, but has most of its commercial aircraft operations in the Pacific Northwest, is also cutting spending on suppliers, freezing hiring and eliminating most travel.
Despite two full days of negotiations with the help of the Federal Mediation and Conciliation Service, the union said Wednesday that no resolution had been reached and no further negotiations were planned, according to CBS Seattle affiliate KIRO-TV.
Strikers have been picketing at several plants in the Seattle area, Oregon and California. The union, which recommended the offer that its members later rejected by 96 percent, is surveying workers to see what they want in a new contract. The union’s last strike at Boeing, in 2008, lasted about two months.
If the strike doesn’t end soon, Boeing’s credit rating could be downgraded to non-investment grade or “junk” status, making borrowing more expensive. Shortly after the strike began Friday, Moody’s placed Boeing on credit watch for a possible downgrade, and Fitch said a strike lasting more than two weeks would make a downgrade more likely.
