Kelly Ortberg has come out of retirement to get the ship back on course, but Boeing’s new CEO has a big fire to put out first. As more than 33,000 factory workers go on strike that analysts estimate could cost the company $3.5 billion, the company announced sweeping cost-cutting measures on Monday, including a hiring freeze, “significant cuts” to supplier spending and a halt to orders for most of its commercial aircraft. But the measures are a temporary stopgap at best, as ratings agencies consider downgrading the company’s debt to junk status and the stock continues to falter.
In June Fortune Shawn Tully called the looming conflict between Boeing and its workforce “America’s most important labor negotiation in decades.” So far, it has been a disaster.
Late last week, Boeing and union officials agreed to a contract that would have increased wages by 25 percent over four years. Nearly 95 percent of voting workers rejected the contract, the International Association of Machinists and Aerospace Workers said, and 96 percent approved a strike.
Boeing shares have fallen 4% since the start of last week, hitting a 52-week low of $154.02 on Monday before rising slightly to close above $155. The stock has fallen 38% since the start of the year. The year began with a Boeing 737 Max fairing falling off during an Alaska Airlines flight in January. Then things got worse: The company’s operating loss more than tripled year-on-year in the second quarter, to $1.4 billion.
Boeing employees don’t forget past CEO raises, says BofA
While Ortberg could have come into office to turn things around, his last-ditch effort to reach workers, including warnings that “a strike would jeopardize our collective recovery,” fell short.
While Bank of America executive Ronald Epstein credits the former Rockwell Collins CEO with his efforts, two decades of well-documented missteps appear to have taken their toll.
“During (former CEO Dave Calhoun’s) tenure, his total compensation increased 54.8 percent from 2021 to 2024,” Epstein wrote in a note last week, “while (Boeing’s) stock price fell 20 percent over the same period while the S&P rose 40 percent.”
Many Boeing employees are demanding a 40 percent pay raise after years of seeing pay increases lagging far behind the rest of the industry. Boeing COO Stephanie Pope told employees the 25 percent increase was a big step for a company that is about $60 billion in debt, Epstein said. But given that Calhoun’s compensation is now 273 times higher than the average Boeing worker, it’s no surprise that the demand has been difficult to pass, he wrote.
“We also believe that Boeing management has lost touch with its workforce because the union is expected to take a long-term perspective while management has been too focused on short-term financial goals for so long,” Epstein said.
While Ortberg has made it clear that he wants to return to the negotiating table as soon as possible, an agreement could take some time. Epstein found that strikes at Boeing have lasted an average of just under 60 days over the past eight decades.
Epstein pointed out that Boeing had previously planned to produce 42 of its 737 aircraft this month. The company is now in a particularly weakened position due to the strike, he said, as it had just pushed that monthly target back to March.
