Boeing Co. (BA) has begun temporary furloughs for thousands of its employees as the company grapples with the financial impact of a strike by the International Association of Machinists and Aerospace Workers (IAM). This strike, involving over 30,000 workers, began on Saturday after the union rejected Boeing’s proposed 25% wage increase over four years.
In a memo to employees, Boeing CEO Kelly Ortberg announced that the furloughs, affecting U.S.-based executives, managers, and employees, will occur one week out of every four until the strike concludes. Ortberg and his leadership team will also be taking pay cuts, according to The Washington Post.
Ortberg emphasized the severity of the situation, stating, “With production paused across many key programs in the Pacific Northwest, our business faces substantial challenges and it is important that we take difficult steps to preserve cash and ensure that Boeing is able to successfully recover.”
The IAM is demanding a 40% pay increase and the reinstatement of a pension program, a significant difference from Boeing’s offer. The strike, the first by Boeing machinists in 16 years, has already led to production halts on several key aircraft programs.
Analysts estimate that the strike could cost Boeing $1 billion per week, with the potential for the company to burn through $3.5 billion in cash if the strike continues through September, according to Bloomberg Intelligence.
In an attempt to mitigate the financial impact, Boeing has implemented several measures, including a hiring freeze, reduced capital and supplier spending, and an end to nonessential travel. Production of the 787 jet in South Carolina, however, remains unaffected.
Following the strike’s onset, Boeing and the union returned to the negotiating table with federal mediators on Wednesday. The talks aim to resolve the wage and pension disputes that triggered the strike.
The union’s demand for a 40% wage hike significantly complicates negotiations. Adding to the pressure, Elon Musk recently criticized the Federal Aviation Administration for allegedly favoring Boeing over SpaceX in regulatory matters.
Boeing Co. closed at $155.11 on Wednesday, down 0.82% for the day. In after-hours trading, the stock gained 0.38%. Year to date, Boeing’s stock has dropped by 38.39%, according to data from Benzinga Pro.
