By Allison Lampert, David Shepardson and Tim Hepher
(Reuters) – Thousands of Boeing workers will be laid off within weeks, union and industry sources said, as a senior U.S. official flew to Seattle to try to ease a crippling strike and a major airline issued a warning about rising unrest at the aircraft manufacturer.
The first personal intervention from acting US Labor Secretary Julie Su comes days after Boeing unveiled plans to cut 17,000 jobs and impose $5 billion in charges, continuing a year of tumult for the company.
“Acting Secretary Su will meet with both sides today to assess the situation and encourage both sides to move forward in the negotiation process,” a Labor Ministry spokesperson said on Monday.
Although Su has previously spoken to Boeing and the striking West Coast factory union, this is the first time she has met with both parties in person in Seattle.
The International Association of Machinists and Aerospace Workers (IAM) said its chief negotiator, Jon Holden, had briefed Su on the current talks, “underscoring the Union’s commitment to a negotiated contract that will reflect the skills and dedication of our members appreciate.”
Boeing and a White House spokesman declined to comment on Su’s visit.
About 33,000 workers have gone on strike since September 13, demanding a 40% wage increase over four years.
Boeing will send a 60-day notice next month to thousands of employees, including many in its commercial aviation division, meaning those employees will leave the company in mid-January, a source familiar with the matter said.
A second phase of notifications could be rolled out in December if necessary, the source said.
A spokesperson for the Society of Professional Engineering Employees in Aerospace, which represents Boeing engineers, said the company notified the union Monday that a 60-day notice will be given to its members on Nov. 15.
A Boeing spokesman said the company had shared information with managers, including plans for a 10% reduction in the commercial division, involving both union and non-union workers. The spokesperson added that the striking IAM employees are not currently affected.
Brian Bryant, the IAM’s international president, called the job cuts plan “corporate greed at its worst.”
“Boeing just turned its back on 17,000 of its own employees – the same people who have helped Boeing through crisis after crisis year after year,” he said in a statement.
Shares of the aerospace giant fell 1.3% to $148.99 on Monday, following the company’s surprise announcement on Friday of after-hours job cuts, which also included another delay for the 777X jetliner and the shutdown of civilian cargo aircraft production for the 767.
Boeing will refrain from asking for voluntary departures to limit severance pay and prevent a skills exodus, sources said, adding that the company will rely solely on involuntary layoffs. Rivals are scooping up scarce labor to ease pressure on aerospace supply chains.
“The trick is not to lose the 10% of people you want to keep, which is even more important than normal in the post-pandemic crisis,” said Agency Partners analyst Nick Cunningham.
Boeing has been hiring workers to prepare for higher production rates, which have not materialized because production was restricted by regulators after a door plug blew out on an Alaska Airlines plane in January.
INDUSTRIAL ALARM
The one-year delay in delivery of the 777X until 2026 was widely expected in the industry and brings the delay in delivery of the 777 mini-jumbo successor to six years, amid delays in certification and testing.
Emirates Airlines president Tim Clark, whose initial order for 150 planes helped launch the world’s largest twin-engine jetliner more than a decade ago, hinted at commercial implications.
“We will have a serious conversation with them in the coming months,” he said in a statement. “I don’t see how Boeing can make meaningful predictions about delivery dates.”
He also became the first senior industry figure to express fears, privately whispered by some industry leaders in recent weeks, about Boeing’s ability to handle the worst crisis yet intact.
“Unless the company is able to raise money through a rights offering, I see a looming downgrade of investments with Chapter 11 looming on the horizon,” Clark told Air Current, an aviation industry publication.
Emirates is the biggest user of the 777 jet family, a long-haul workhorse whose initial success was clouded by delays to its successor and the crisis that engulfed Boeing’s smaller 737 cash cow over safety and quality issues.
Friday’s package of announcements showed Boeing has just over $10 billion in gross cash, a much-touted level that analysts said would ease near-term pressure, while the company warned it could still had to raise money.
Most analysts expect Boeing to raise up to $15 billion through a stock offering. But major airlines’ perception of Boeing’s financial risk remains a sensitive topic as many have billions of dollars in deposits with the plane maker – an exposure some are already looking to limit due to delays, industry sources say.
Boeing declined to comment on Clark’s comments.
Credit rating agency S&P has warned that Boeing is at risk of losing its prized investment-grade credit rating.
(Reporting by Allison Lampert in Montreal, David Shepardson in Washington, Joe Brock in Seattle, Tim Hepher in Paris and Chandni Shah in Bengaluru; Additional reporting by Abhijith Ganapavaram and Surbhi Misra in Bengaluru and Mike Stone in Washington; Editing by Lisa Shumaker, Matthew Lewis and Jamie freed)
