By David Shepardson and Allison Lampert
(Reuters) – Boeing said on Wednesday it would temporarily furlough tens of thousands of employees after about 30,000 machinists went on strike on Friday, halting production of its blockbuster 737 MAX and other aircraft.
“We are initiating temporary furloughs in the coming days that will impact a large number of executives, managers and U.S.-based employees,” CEO Kelly Ortberg said in an email to employees. “We are planning to have select employees take one week of leave every four weeks on a rolling basis for the duration of the strike.”
The strike, Boeing’s first since 2008, adds to a tumultuous year for the planemaker that began when a door panel on a new 737 MAX jet broke off in mid-air in January.
Ortberg also said he and other Boeing leaders “will accept a proportional pay reduction for the duration of the strike.”
Boeing and the International Association of Machinists and Aerospace Workers held two days of talks in the presence of federal mediators. The union, which on Tuesday said it was frustrated with the first day of mediation, said Wednesday night that it had concluded another day of talks without “any significant progress.”
“While we remain open to further discussions, either directly or through mediation, there are currently no additional dates scheduled,” the union said. “We are fully committed to fighting for the contract our members deserve.”
Boeing did not immediately respond to a request for comment on IAM’s statement.
The lengthy furloughs show Ortberg is preparing the company to weather a prolonged strike that is unlikely to be easily resolved given anger among rank-and-file workers.
A prolonged labor battle could cost Boeing several billion dollars, further straining its finances and threatening its credit rating, analysts said.
“The cuts are unlikely to fully offset the costs of a prolonged strike,” said Ben Tsocanos, director of aerospace at S&P Global Ratings.
The union has been pushing for a 40% raise over four years in its first full contract negotiations with Boeing in 16 years, well above the planemaker’s offer of 25%, which was roundly rejected.
Brian Bryant, IAM’s international president, said actions such as unpaid layoffs and salary cuts amounted to “smoke and mirrors” given the company’s past spending on bonuses and compensation for senior executives.
“This is just part of their plan to make it look like they’re trying to save money,” added Bryant, who was in the Seattle area picketing with the “resilient” members on Wednesday.
“The ball is in Boeing’s court. They could end this strike tomorrow,” Bryant said, adding that to do so they would need to get a fair wage, a pension, the restoration of a bonus and health insurance.
In the email to employees, Ortberg said the company would not take any “actions that would inhibit our ability to fully recover in the future. All activities critical to our safety, quality, customer service and key certification programs will be prioritized and continue, including 787 production.”
The company employs about 150,000 people in the United States. It is unclear exactly which employees are affected by the layoffs. A union representing Boeing engineers said its members were not affected.
The strike, now in its sixth day, also poses risks for the company’s extensive network of suppliers, some of which are also considering taking time off, several told Reuters.
“There’s certainly concern among suppliers,” said Nikki Malcom, executive director of the Pacific Northwest Aerospace Alliance. “This will have a significant impact on suppliers if it continues for a long time.”
PRODUCTION STOP
The strike has halted production of Boeing’s 737 MAX narrow-body jets, along with its 777 and 767 wide-body planes, delaying deliveries to airlines.
However, a major Chinese lessor said it placed a new order on Wednesday for 50 MAX jets for delivery between 2028 and 2031, in a sign that long-term demand for Boeing planes remains intact.
The automaker said Monday it was freezing hiring to cut costs as its balance sheet is already saddled with $60 billion of debt.
The company has also stopped ordering most parts for all Boeing aircraft programs except the 787 Dreamliner, a move that will hurt its suppliers.
One senior supplier dismissed the latest announcement as “panic mode” and said it underlined Boeing’s lack of room to maneuver given its already strained balance sheet.
“It would be better if they settled down; they are very close to the precipice,” said the supplier, who asked not to be identified.
Boeing shares are down about 40% so far this year.
(Reporting by David Shepardson in Washington; Additional reporting by Allison Lampert in Montreal and Tim Hepher in Paris; Editing by David Gaffen, Matthew Lewis, Anna Driver and Jamie Freed)
