Boeing Cuts Expenses to Deal With Strike Losses

Boeing Co. will take a series of cost-cutting measures, including considering temporary unpaid leave and a hiring freeze, to cope with a strike by workers at its northwest U.S. factory, the company said on Monday, according to Agence France-Presse.

Boeing CEO Dennis Muilenburg said the company would launch unpaid leave in the coming days to save cash during the union machinists' strike, which began last week. The move would affect executives, managers and employees in the U.S. The selected employees would take one week off every four weeks while keeping benefits. Muilenburg said the CEO and other senior managers would take a pay cut during the strike, but he did not specify the exact amount.

Brian West, Boeing's chief financial officer, said in a message to employees that "our business is in a difficult time. This strike has significantly impacted our economic recovery, and we must take necessary actions to preserve cash and defend our common future." The hiring freeze would affect all levels of employees and suspend some forms of pay raises. Boeing also suspended "all non-essential travel" that does not involve key customers, projects, regulatory or supply chain activities, and stopped all business and first-class travel. All non-essential capital spending would also be suspended. Other measures include cutting spending on trade shows and charitable donations, and "substantial reductions in supplier spend."

Boeing's 33,000 employees started the strike last week. Both of its factories in Seattle have been idled. AFP reported on Monday that Boeing and the union were due to continue negotiations, after progress in the talks was not smooth. The union claimed that Boeing was not serious about the negotiations. AFP said that the root of the workers' dissatisfaction was the stagnation of wages for more than a decade, while inflation in the U.S. has put more pressure on living costs.

Analysts said that West's measures highlighted the financial crisis Boeing is facing, with its credit rating at risk of being downgraded to below investment grade, and its cash is flowing out as aircraft production declines. Industry insiders said that Boeing's cash flow is now under great pressure and almost reaches the bottom line for its operation. Given that the company may not be able to reach a deal with the union, its labor costs may rise and its aircraft production capacity will be difficult to ramp up, Boeing may not be able to form positive cash flow until next year. Rob Spinage, a senior aviation finance analyst in the U.S., said that Boeing's current problems are not just about turning around its finances, but need improvement in almost all aspects.

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