Things are in dire straits at The Boeing Company. Just ask the 33,000 unionized workers who walked off the job last week after rejecting the latest contract. Or, of course, read the barrage of reports of mind-boggling malfunctions grounding its planes, namely its disastrous 737 Max. Internally, leaders are scrambling to stanch the bleeding.
On Monday, Boeing CFO Brian West sent a memo to employees detailing the plan for cost-cutting and survival. The memo, shared on Twitter/X by Jon Ostrower, editor-in-chief of trade publication The Air Current, details West’s attempts at cutting losses as Boeing grapples with the avalanche of recent losses.
“Our business is in a difficult period,” West wrote, adding the strike “jeopardizes our recovery in a significant way.” As such, to preserve cash and “safeguard” the company’s future, it’s in cost-saving mode.
On that list of new cutbacks are a company-wide hiring freeze, a pause in raises and promotions, halting any non-essential travel, pausing all charitable or marketing and advertising spend, ending catered meals, and pausing offsites. Also, no more first-class or business-class air travel for the C-suite (though no mention was made of whether private jets are still allowed.)
To boot, West said the manufacturer will significantly reduce its supplier spending and cut off most of its orders for 737 Max, 767 and 777 purchases. And leadership is “considering the difficult step of temporary furloughs” for many workers.
Each of these steps represent a hail mary for the embattled company. “In the first half of 2024, Boeing bled $8.3 billion in free cash flow,” Fortune’s Shawn Tully reported. “News of the [union’s] ‘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.” Plus, rating agencies are reportedly mulling the choice to downgrade Boeing’s debt to junk.
To protect Boeing’s credit rating, leaders must improve its cash flow, James Darcy, founder of aerospace advisory firm Darcy Strategic, told Fortune. To improve cash flow, it has to deliver more planes, faster. That’s “impossible” to do without ending the strike, Darcy said. “Yet the terms on which they may need to agree to settle the strike will do nothing to help their cash flow in the long term.”
Last month, following longtime CEO Dave Calhoun’s departure, Kelly Ortberg emerged from retirement to attempt to right the ship. He just bought a $4.1 million house.
In remarks that the Seattle Times called “notably conciliatory” on Friday, West said Boeing leaders want “to get back to the table and to hammer out a deal” with the Machinists union. Ortberg is personally engaged in that effort, he added.
“The amount of leverage that Boeing’s workers have over the company at this moment is unprecedented, but bringing Boeing to its knees is certainly not in their long-term best interest,” Darcy said. “Boeing will need to approach negotiations with a degree of humility that they haven’t shown in the past, but the labor side will need to retain a great deal of pragmatism if both sides are to have a healthy future.”
The kinds of moves West outlined in the internal memo are “immediate cash-saving measures that will impact the bottom line,” Jason Walker, founder of Thrive HR Consulting, told Fortune’s Sheryl Estrada. “This is a pretty standard approach when you are worried about the amount of cash you are going to have on hand.”
On the other hand, the intensity of these cutbacks might stand to further dampen workers’ views of the company. “This is just going to make it worse,” Walker told Estrada. “I think [Boeing is] really in a death spiral of [its] own making.”
