Boeing stock (BA) slid 2% in after-hours buying and selling Friday because the company said it will reduce its workforce by 10% and delay the primary delivery of its 777X jet to 2026 amid an ongoing employee strike.
“Our business is in a difficult position, and it is hard to overstate the challenges we face together,” CEO Kelly Ortberg stated in a message to workers posted on Boeing's web site. “Beyond navigating our current environment, restoring our company requires tough decisions and we will have to make structural changes to ensure we can stay competitive and deliver for our customers over the long term.”
He added that the job cuts would come with executives, managers and workers.
An ongoing strike by Boeing's greatest union, the International Association of Machinists and Aerospace Workers (IAM), is proving pricey on a number of fronts for the company.
The work stoppage has interrupted the company's restoration efforts to ramp up manufacturing of its bestselling 737 Max jets to 38 monthly by the top of the yr, up from roughly 25 monthly in June and July.
Estimates from S&P Global put the price of the strike at roughly $1 billion monthly after bearing in mind cost-saving measures the company has taken in response to it.
Earlier this week the credit standing company placed Boeing on CreditWatch Negative, which elevated the probability of a downgrade if the work stoppage continues till the top of the yr. Riskier credit score makes it tougher and costly for firms to borrow cash.
S&P expects Boeing will incur a money outflow of roughly $10 billion in 2024.
As a consequence, Wall Street analysts anticipate Boeing will want to elevate money via an fairness providing. At the top of the second quarter, Boeing had roughly $58 billion in complete debt and $12.6 billion in money.
“Based on our conversations with buyers, it ought to be no shock that Boeing is taking a look at an fairness elevate. We assume most buyers have been anticipating the company to elevate greater than $10b, probably following the conclusion of the machinists strike,” JPMorgan analyst Seth Seifman and his team wrote in a recent note.
The analysts note the size of the raise could be determined by how long the strike lasts, and investors would be more reluctant to sign on with one still underway.
Earlier in the week, the plane maker took a tougher stance with the union after a breakdown in negotiations this week left little hope of a quick resolution to the strike.
On Thursday, the plane maker filed an unfair labor practice charge against representatives of IAM.
Boeing said as a result of mediation this week, the company made further improvements to a prior offer, but “the union didn't critically think about these proposals and continues to insist on unreasonable calls for.”
“The union’s public narrative is deceptive and making it tough to discover a answer for our workers. We stay dedicated to reaching a compromise to finish the strike,” said a Boeing statement.
The move comes days after bargaining talks involving mediators broke down and the plane manufacturer withdrew its contract proposal on Tuesday.
IAM did not immediately respond to a request for comment.
“That’s only a transfer from [Boeing] to create some strain. But identical to most strikes … it’s going to finish by them going again to the desk and figuring it out,” New York City-baed employment attorney Nicole Brenecki told Yahoo Finance.
Union members walked off the job on Sept. 13 after rejecting a tentative contract. After the third round of negotiations broke down Tuesday, the union said Boeing refused to propose any wage increases or vacation and sick leave accrual and would not reinstate a benefit pension.
IAM has a rally planned for Tuesday of next week.
Boeing stock is down roughly 40% year to date.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
