Boeing Co. announced late Friday that it plans to cut approximately 10% of its workforce, a move that surprised markets as the aerospace and defense giant continues to face significant financial challenges.

The company warned investors of a larger-than-expected third-quarter loss and lower revenue than Wall Street had predicted.

CEO Ortberg explains the move

Boeing’s Chief Executive, Kelly Ortberg, stated that the business is in a “difficult position” and emphasized the need for “tough decisions” to restore the company’s competitive edge.

“Our business is in a difficult position, and it is hard to overstate the challenges we face together,” Ortberg said in a statement.

These layoffs will impact employees across the company, including executives and managers, as Boeing tries to adjust its structure to cope with ongoing issues.

The company had about 171,000 employees, primarily based in the US, as of its latest filing.

Impasse in machinists strike adds pressure

The decision comes on the heels of a labor strike that has entered its fourth week. Negotiations with striking machinists in Washington state reached an impasse earlier this week.

According to S&P Global Ratings, the strike is costing Boeing approximately $1 billion per month, adding to the company’s financial strain.

Ortberg acknowledged that addressing the business’s problems will require structural changes to maintain competitiveness in the long term.

The strike further complicates Boeing’s recovery, as the company faces pressure from multiple fronts, including operational disruptions and financial difficulties.

Weaker-than-expected Q3 performance

Boeing’s preliminary third-quarter earnings report paints a grim picture.

The company forecasted revenue of $17.8 billion, far below the analyst consensus of $18.49 billion.

It also expects to report a GAAP loss of $9.97 per share and a negative operating cash flow of $1.3 billion for the quarter.

This significant loss contrasts sharply with the anticipated loss of $1.61 per share, according to FactSet analyst estimates.

At the end of the quarter, Boeing had $10.5 billion in cash on hand, but the ongoing challenges are creating uncertainty for the company’s future.

The company plans to release its full third-quarter results on October 23, where more details on its financial situation will be disclosed.

Project delays and production cuts compound woes

Adding to Boeing’s woes, the company announced that it is delaying the delivery of its 777-9 commercial jet until 2026 and its 777-8 freighter until 2028.

These delays will result in a pretax earnings charge of $2.6 billion. Boeing also decided to end production of one of its freighter jets, signaling further disruptions to its commercial aircraft business.

Following the news, Boeing shares fell nearly 2% in extended trading on Friday, after finishing the regular trading session up by 3%.

Credit ratings under review, bond downgrades looming

Boeing’s bond rating is also under pressure.

S&P Global Ratings put Boeing’s bonds under review for a possible downgrade earlier this week, making it the third major credit-rating agency to raise concerns about Boeing’s ability to meet its financial obligations.

Moody’s and Fitch have already downgraded Boeing’s bonds to the lowest level of investment grade, leaving the company on the brink of a speculative-grade, or “junk,” bond rating.

A downgrade to junk status would severely impact Boeing’s ability to borrow money at a time when the company is trying to turn its business around.

It would also exclude Boeing’s bonds from the portfolios of pension funds and other institutional investors that are only allowed to hold investment-grade debt.

Stock performance and broader market comparison

Boeing’s stock has not performed well in 2024, with shares down by 42% this year.

This contrasts sharply with the S&P 500 index, which has gained approximately 22% over the same period.

The company’s financial troubles, coupled with production delays, a labour strike, and the threat of a bond downgrade, have weighed heavily on investor sentiment.

As Boeing prepares to release its full quarterly results on October 23, investors will be closely watching for further developments in the company’s efforts to address its challenges.

The upcoming layoffs, ongoing strike, and delayed aircraft deliveries are all factors that could shape Boeing’s near-term outlook.

For now, the aerospace giant faces an uphill battle to restore its financial health and competitive position in the global market.

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