Shares of Boeing ( BA ) fell 2% in after-hours trading on Friday after the company said it would cut its workforce by 10%, or about 17,000 jobs, and delay the first delivery of its 777X aircraft until 2026 , amid an ongoing workers’ strike.
“Our company is in a difficult position and it is difficult to overstate the challenges we face together,” CEO Kelly Ortberg said in a message to employees on Boeing’s website. “In addition to navigating our current environment, recovering our business will require difficult decisions and we will need to implement structural changes to ensure we remain competitive and continue to serve our customers in the long term.”
He added that the job losses would also affect executives, managers and employees. Boeing had about 171,000 employees as of December 2023, according to an SEC filing.
“We have an aircraft manufacturer that is in very, very big trouble. What they did here is not a drill,” Mike Boyd, president of aviation consultancy Boyd Group International, told Yahoo Finance on Friday after the job cuts were announced.
An ongoing strike by Boeing’s largest union, the International Association of Machinists and Aerospace Workers (IAM), is proving costly for the company on several fronts.
The work stoppage has interrupted the company’s recovery efforts, which include ramping up production of its best-selling 737 Max jets to 38 per month by the end of the year, up from about 25 per month in June and July.
Estimates from S&P Global put the cost of the strike at around $1 billion per month, taking into account the cost-cutting measures the company has taken in response.
Earlier this week, the ratings agency placed Boeing on CreditWatch Negative, raising the likelihood of a downgrade if the work stoppage continues through the end of the year. Riskier credits make it more difficult and expensive for companies to borrow money.
S&P expects Boeing to experience cash outflows of about $10 billion in 2024.
As a result, Wall Street analysts expect Boeing will have to raise money through a stock offering. At the end of the second quarter, Boeing had total debt of about $58 billion and $12.6 billion in cash.
“Based on our discussions with investors, it should come as no surprise that Boeing is considering a stock raise. We believe most investors expected the company to raise more than $10 billion, most likely following the end of the machinists’ strike,” JPMorgan analyst Seth Seifman and his team wrote in a recent note.
The analysts note that the size of the increase could be determined by how long the strike lasts, and that investors would be more reluctant to sign up if a strike is still ongoing.
Earlier this week, the aircraft manufacturer took a tougher stance on the union after a breakdown in negotiations this week left little hope of a quick resolution to the strike.
On Thursday, the aircraft manufacturer filed an unfair labor practice complaint against IAM representatives.
Boeing said that as a result of mediation this week, the company made further improvements to an earlier offer, but that “the union has not seriously considered these proposals and continues to push for unreasonable demands.”
“The union’s public narrative is misleading and makes it difficult to find a solution for our employees. We remain committed to reaching a compromise to end the strike,” a Boeing statement said.
The move comes days after negotiations with mediators failed and the aircraft manufacturer withdrew its contract proposal on Tuesday.
IAM did not immediately respond to a request for comment.
“That’s just one step away [Boeing] to create some pressure. But like most strikes, it will end when they come back to the table and figure it out,” New York City-based labor attorney Nicole Brenecki told Yahoo Finance.
Members of the Union left his job on September 13 after rejecting a temporary contract. After the third round of negotiations broke down Tuesday, the union said Boeing declined to propose pay increases or accrual of vacation and sick leave and would not reinstate benefits.
IAM has planned a rally for Tuesday.
Boeing shares are down about 40% year to date.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X @ines_ferre.
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