Good morning. Following aircraft malfunctions and a series of mismanagement missteps, The Boeing Company has a major new dilemma on its hands: Thousands of its workers just walked off the job. In response, CFO Brian West is to cut costs. But will doing so risk creating long-term damage in the form of employee morale sinking even lower?
The latest ordeal for Boeing began on Thursday when about 33,000 unionized workers in the Pacific Northwest voted overwhelmingly to reject a tentative, last-minute agreement reached between the company and the union leadership. Boeing proposed a 25% wage increase over four years and other improvements to health care and retirement benefits, but the union had sought raises of about 40%. The strike began on Friday.
My Fortune colleague Shawn Tully points out that the strike is a big challenge for the company amid a recent string of big losses. “In the first half of 2024, Boeing bled $8.3 billion in free cash flow,” Tully writes. “News of the ‘no’ vote pounded its stock by almost 5.7% on Sept. 13, its shares closed around $158, their lowest level for 2024, and one-third below its price at the year’s start.”
Meanwhile, rating agencies are considering downgrading the company’s debt to junk and the stock continues to falter, Fortune reports. Boeing is now led by new CEO Robert “Kelly” Ortberg, who came out of retirement to take the job last month.
The company has outlined a series of cost-cutting measures. Among them are: a hiring freeze, reducing travel, delays in pay raises, and temporary layoffs. As CFO, West wrote in a letter to employees on Monday that these actions “will create some uncertainty and concern.” He added: “This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future.” Boeing is “working in good faith” to reach a new contract agreement with the unionized workers, West said.
Actions such as hiring freezes and furloughs are immediate cash-saving measures that will impact the bottom line, Jason Walker, founder of Thrive HR Consulting, told me. This is a pretty standard approach when you are worried about the amount of cash you are going to have on hand, he said. Walker has many years of experience as a chief people officer working with C-suite members, such as CFOs.
However, there can be a downside to these practices. When you make this kind of decision, especially if you are Boeing, it only adds to the cultural woes of the company, Walker said. “Employees already have a dim view of management, and this is just going to make it worse; I think they are really in a death spiral of their own making,” he said.
Boeing needs to figure out how to more consciously connect with employees. He added: “From whistleblower lawsuits, the new CEO buying a $4.1 million house, quality issues, and now this—the bad optics just keep going.”
Being laser-focused on the financial aspects of the company is a finance chief’s job, Walker said. However, at times, some CFOs may have “complete disregard for the people side of the business,” and employees usually figure that out quickly, he said.
Sheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were curated by Greg McKenna
Leaderboard
Brian Van Wagener was promoted to CFO of Veeva Systems (NYSE: VEEV), which provides cloud software for the life sciences industry, effective Monday. He will succeed Tim Cabral, who is resigning from his position as interim CFO and will remain on the company’s board of directors. Van Wagener left Veeva after almost six years in February 2023 but rejoined the company in July, serving as executive vice president of finance.
Jeremy Whitaker has resigned from his position as CFO of Lantronix (Nasdaq: LTRX), an internet-of-things products and services provider, effective Monday. Whitaker has accepted the CFO role at a private company, Lantronix said. He will be succeeded by Brent Stringham, the company’s controller, who was appointed interim CFO.
Big Deal
Artificial intelligence’s use in financial analysis will deliver significant productivity gains to investors but widen the gap between winners and losers, according to a new report from Moody’s. However, AI models will become less reliable over time at investment decision-making because patterns in financial markets change quickly, the report said, necessitating robust processes and automatic systems monitoring.
AI will better enable the conversion of so-called alternative data from things like social media, credit card transactions, or satellites, the report added, making analysis more timely and less dependent on corporate publications. The authors also said AI would deepen risk assessment, enabling investment professionals to measure risk precisely at the asset level and map relationships between assets across companies to reveal vulnerabilities.
Going deeper
“Jamie Dimon’s right-hand man is ready to lead JP Morgan—but time is not on his side,” is a new report from Fortune’s Michael del Castillo. JPMorgan Chase president Daniel Pinto is the CEO’s “hit-by-a-bus replacement” and “could run the bank tomorrow,” according to Dimon himself. Now 61 years old, however, Pinto is seen in some circles as too old for the job.
Overheard
“Keeping your culture strong is not a birthright. You have to work at it all the time.”
—Andy Jassy, CEO of Amazon, wrote in a message to employees announcing that they will be required to work in the office five days a week, beginning in January.
