Strike delivers another blow to Boeing's turnaround effort
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New Boeing CEO Kelly Ortberg. Photo illustration: Sarah Grillo/Axios. Photo: Daniel Acker/Bloomberg via Getty Images
Boeing's turnaround effort suffered another setback today as thousands of workers walked off the job after overwhelmingly rejecting a contract offer.
Why it matters: A prolonged strike could cost Boeing billions — not ideal for a company sitting on a $45 billion debt pile, already struggling to ramp up production and repair a battered reputation.
Catch up quick: The vast majority of the 33,000 Seattle-area machinists — part of the International Association of Machinists and Aerospace Workers union — who construct Boeing's 737, 777 and 767 jets went on strike this morning after dismissing a deal negotiated by their union leaders.
- Boeing's already working to repair output of its top-selling single-aisle jets after a series of safety incidents brought increased oversight from regulators.
The impact: The strike "will jeopardize our recovery," CFO Brian West said today at an industry conference.
- Though West declined to speculate on the financial toll, Jefferies analyst Sheila Kahyaoglu recently estimated a $1.5 billion cash hit for every 30 days that workers are off the line.
- "I will tell you that we're working every responsible lever to do what's right to conserve cash," West said. "Our expectation is to want to get back to the table and to hammer out a deal."
Zoom out: The strike is an early test for new CEO Kelly Ortberg, who is tasked with rebuilding the trust between Boeing's workers and management and restoring the company's broken manufacturing culture.
- When he was CEO of Rockwell Collins, one of Boeing's big suppliers, Ortberg had a reputation for regularly walking the production floor, Axios' Hope King reported when he was named the CEO in July.
- "That's a priority, resetting that relationship," West said of Ortberg, who started the job just last month. "He's been out all week, listening firsthand to the feedback of our employees. And he's digesting, and Kelly is already at work to get an agreement that meets and addresses their concerns."
Yes, but: "[Ortberg's] expertise is in manufacturing, which is the biggest problem that Boeing has, not in labor negotiations," Peter McNally, an analyst at market research firm Third Bridge, tells Axios in an email today.
- "Kelly Ortberg has been on the job for a little more than a month, and he inherited this problem with the union."
What we're watching: The company's priority now is ending the strike as quickly as possible. Seven prior strikes by its factory workers between 1948 to 2008 have lasted an average of 58 days.
