Boeing will furlough thousands to preserve cash during labor strike

Boeing’s CEO said Wednesday that the company will begin furloughing “a large number” of employees to conserve cash during the strike by union machinists that began last week.

Chief Executive Kelly Ortberg said the people who would be required to take time off without pay starting in the coming days include executives, managers and other employees based in the U.S.

“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,” Ortberg said in a company-wide message to staff.

Boeing didn’t say how many people will face rolling furloughs, but the number is expected to run into the tens of thousands. The aerospace giant had 171,000 employees at the start of the year.

About 33,000 Boeing factory workers in the Pacific Northwest began a strike Friday after rejecting a proposal to raise pay by 25% over four years. They want raises of at least 40%, the return of a traditional pension plan and other improvements in the contract offer they voted down.

The strike is halting production of several airplane models, including Boeing’s best-selling plane, the 737 Max. The company gets more than half of the purchase price when new planes are delivered to buyers, so the strike will quickly hurt Boeing’s cash flow.

Ortberg said selected employees will be furloughed for one week every four weeks while retaining their benefits. The CEO and other senior executives will take pay cuts during the duration of the strike, he said, without stating how deep the cuts will be.

All work related to safety, quality, customer support and certification of new planes will continue during the furloughs, he said, including production of 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 paused across many key programs in the Pacific Northwest, our business faces substantial challenges and it is important that we take difficult steps to preserve cash and ensure that 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-airplanes business located in the Pacific Northwest, is also cutting spending on suppliers, freezing hiring and eliminating most travel.

Company and union representatives met with federal mediators Tuesday to restart negotiations and were expected to meet again Wednesday. In a website post addressed to members, the union said it was frustrated by the first day of new talks.

“The company was not prepared and was unwilling to address the issues you’ve made clear are essential for ending this strike: Wages and Pension,” the union said. “The company doesn’t seem to be taking mediation seriously.”

Striking workers are picketing at several locations in the Seattle area, Oregon and California. The union, which recommended the offer that members later rejected by a 96% vote, is surveying the workers to learn what they want in a new contract. The union’s last strike at Boeing, in 2008, lasted about two months.

If the walkout does not end soon, Boeing’s credit rating could be downgraded to non-investment or junk status, which would make borrowing more expensive. Shortly after the walkout began Friday, Moody’s put Boeing on review for a possible downgrade, and Fitch said a strike longer than two weeks would make a downgrade more likely.