By DAVID KOENIG and MANUEL VALDES
EVERETT, Wash. — Boeing reported a loss of more than $6 billion in the third quarter and immediately turned its attention to union workers who will vote Wednesday whether to accept a company contract offer or continue their crippling strike, which has dragged on for nearly six weeks.
New CEO Kelly Ortberg laid out his plan to turn Boeing around after years of heavy losses and damage to its reputation.
In remarks he planned to deliver later Wednesday to investors, Ortberg said Boeing needs “a fundamental culture change in the company.” To accomplish that, he said, company leaders need to spend more time on factory floors to know what is going on and “prevent the festering of issues and work better together to identify, fix, and understand root cause.”
Ortberg repeated that he wants to “reset” management’s relationship with labor “so we don’t become so disconnected in the future.” He expressed hope that machinists will vote to approve the company’s latest contract offer and end their strike.
“It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic company and aerospace leader once again,” he said.
The strike is an early test for Ortberg, a Boeing outsider who became CEO in August.
Ortberg has already announced large-scale layoffs and a plan to raise enough cash to avoid a bankruptcy filing. He needs to convince federal regulators that Boeing is fixing its safety culture and is ready to boost production of the 737 Max — a crucial step to bring in much-needed cash.
Boeing can’t produce any new 737s, however, until it ends the strike by 33,000 machinists that has shut down assembly plants in the Seattle area.
Ortberg has “got a lot on his plate, but he probably is laser-focused on getting this negotiation completed. That’s the closest alligator to the boat,” said Tony Bancroft, portfolio manager at Gabelli Funds, a Boeing investor.
Boeing said Wednesday that it lost $6.17 billion in the period ended Sept. 30, with an adjusted loss of $10.44 per share. Analysts polled by Zacks Investment Research were calling for a loss of $10.34 per share.
Revenue totaled $17.84 billion, matching Wall Street estimates.
Shares were flat before the opening bell.
Boeing hasn’t had a profitable year since 2018, and Wednesday’s numbers represent the second-worst quarter in Boeing’s history. The long-profitable company’s fortunes soured after two of its 737 Max jetliners crashed in October 2018 and March 2019, killing 346 people. Safety concerns were renewed when a panel blew off a Max during an Alaska Airlines flight in January.
Ortberg said Boeing is at a crossroads.
“The trust in our company has eroded. We’re saddled with too much debt. We’ve had serious lapses in our performance across the company, which have disappointed many of our customers,” the new CEO said. But he also highlighted the company’s strengths, including a backlog of airplane orders valued at a half-trillion dollars.
Investors were looking for Ortberg to project calm, determination and urgency when he presides over an earnings call for the first time since he ran Rockwell Collins, a maker of avionics and flight controls for airline and military planes, in the last decade.
The biggest news of the day, however, is likely to come Wednesday evening, when the International Association of Machinists and Aerospace Workers reveals whether striking workers are ready to go back to their jobs.
They will vote at union halls in the Seattle area and elsewhere on a Boeing offer that includes pay raises of 35% over four years, $7,000 ratification bonuses, and the retention of performance bonuses that Boeing wanted to eliminate.
Boeing has held firm in resisting a union demand to restore the traditional pension plan that was frozen a decade ago. However, older workers would get a slight increase in their monthly pension payouts.
At a picket line outside Boeing’s factory in Everett, Washington, some machinists encouraged colleagues to vote no.
“The pension should have been the top priority. We all said that was our top priority, along with wage,” said Larry Best, a customer-quality coordinator with 38 years at Boeing. “Now is the prime opportunity in a prime time to get our pension back, and we all need to stay out and dig our heels in.”
Best also thinks the pay increase should be 40% over three years to offset a long stretch of stagnant wages, now combined with high inflation.
“You can see we got a great turnout today. I’m pretty sure that they don’t like the contract because that’s why I’m here,” said another picketer, Bartley Stokes Sr., who started working at Boeing in 1978. “We’re out here in force, and we’re going to show our solidarity and stick with our union brothers and sisters and vote this thing down because they can do better.”
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Koenig reported from Dallas.
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Originally Published:
Boeing, the American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide, recently reported a loss of $6 billion in their quarterly earnings. This announcement came a few days before the union is set to cast their votes on the proposed workforce cuts and education benefits.
The aviation giant attributes this significant loss to the impact of the coronavirus pandemic, which severely crippled the air travel industry around the globe. The pandemic has forced the airlines to ground fleets and cut capacities, leading to a considerable drop in demand for new aircraft.
In addition, Boeing continues to reel from the ongoing grounding of the 737 Max, due to two fatal aeroplane crashes in Ethiopia and Indonesia. Costs associated with halting production, storing uncompleted aircraft, and compensating airlines and families of crash victims have severely impacted the company’s financial bottom line.
Boeing’s struggling commercial airplane division reported a $5 billion loss, accounting for a significant chunk of the company’s overall deficit. The division, which typically contributes a significant portion of Boeing’s revenue, experienced a dramatic drop in the number of deliveries – from 90 aircraft in the same period last year to just 16 this quarter.
However, the company’s defense, space, and security unit, as well as global services division, offered some respite from this deep financial plunge. While these divisions also faced strains, they reported a much more moderate decline in their quarterly earnings.
In an attempt to cope with the ongoing challenges, Boeing announced plans for significant workforce cuts, hoping to reduce overhead costs and mitigate some of the financial impact. The company aims to trim its 160,000 strong workforce by approximately 10%, affecting many jobs both in and outside the United States.
The proposal has stirred a contentious debate as it prepares to go to a vote with the union. Many at the union are calling for additional transparency from Boeing and pushing back on the sweeping layoffs. Education benefits, a paint point for many employees, is also part of this discussion.
Despite the negative report, Boeing remains determined to weather the storm. Their focus will now be on reducing production rates and minimizing expenditures, while aligning the organization to the new market reality.
The situation underscores the precarious position many airlines and related industries find themselves in as the pandemic takes a toll on air travel. Continued scrutiny of Boeing’s handling of its challenges, both from within the company and from the global community, will shape the future of this aviation giant.
The outcome of the union’s impending vote will undoubtedly have a substantial impact on the company’s recovery plans moving forward. As one of the largest global aerospace manufacturers, Boeing’s resilience or lack thereof will be a bellwether for the wider industry.
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Boeing reports $6 billion quarterly loss ahead of vote by union
