Boeing (BA, Financial), a leading American aerospace company, is considering selling underperforming business units to raise cash amid operational challenges caused by plummeting production and ongoing employee strikes. The company's board met recently to review departmental reports and discuss potential asset sales, although CEO Kelly Ortberg was absent due to ongoing union negotiations aimed at ending the strikes.
Boeing management and union leaders have reached a tentative agreement to increase machinists' wages by approximately 35% over four years. However, after initial rejection by the workers, it remains uncertain if the new proposal will be accepted. A pending vote on the agreement could significantly impact Boeing's financial stability, with insiders speculating about potential bankruptcy or company restructuring.
Ortberg is pushing for measures to raise at least $10 billion in cash and plans to cut Boeing's workforce by about 10% to minimize losses. These efforts are amid an intensified manufacturing crisis aggravated by the strikes and disruption of Boeing's extensive supply chain. Boeing is also working to exit a joint rocket manufacturing venture with defense contractor Lockheed Martin (LMT) and has been divesting from other defense projects.
Recently, Boeing sold a small defense subsidiary producing surveillance equipment for the U.S. military. Ortberg is expected to make his first public statement as CEO this week, coinciding with the union vote on the new contract and the release of Boeing's third-quarter financial results. The company has warned of significant expenditures and a net loss of up to $6 billion for the quarter ending September 28.
Despite increased global demand for air travel, Boeing's ability to deliver completed aircraft to customers is critical for generating operating cash flow. As of late September, Boeing had an order backlog of 6,197 commercial planes yet to be delivered. Hiring efforts post-COVID-19 to boost productivity have not met expectations due to a production halt following an incident with Alaska Airlines' Boeing jet in January, which led to intensified regulatory scrutiny and lowered production capacities.
The ongoing strikes, involving approximately 33,000 employees, have severely disrupted Boeing's production plans and nearly depleted its cash reserves. In response, Boeing announced plans to lay off up to 17,000 workers and take on $5 billion in costs. This turmoil led U.S. Acting Labor Secretary Julie Su to intervene in Seattle to address the labor disputes.
