Ryan Bergh, an engineer at the Boeing plant in Everett, Washington for 10 years, cheers during a strike rally for the International Union of Mechanical and Aerospace Workers (IAM) at Seattle Union Hall in Seattle, Washington on October 15, 2024. ( Photo by Jason Redmond/AFP) (Photo by JASON REDMOND/AFP via Getty Images)
Jason Redmond | AFP | Getty Images
Boeing has already prepared investors for a rough quarterly report. Now, new CEO Kelly Ortberg has a chance to share his vision for the troubled manufacturer, from a potential labor deal that ends the strike to a limited future.
When he takes the microphone for his first earnings call as Boeing CEO on Wednesday, more than 32,000 striking engineers will begin voting on a sweet new contract proposal. The results of the labor vote are expected on Wednesday night.
Analysts are cautiously optimistic that the new proposal, which requires a simple majority vote, could pass, ending a more than five-week work stoppage that has halted most of the company’s plane production and added to its cash roughly 8 billion dollars in the first half of the year. Boeing last posted an annual profit in 2018.
During the call, investors, analysts and the public could get input from Ortberg on how Boeing will fare in the coming years, as well as clearer estimates of the company’s production targets for next year.
Boeing and S&P 500 five-year performance.
Narrowing of business
Ortberg, a longtime aerospace veteran who previously ran Rockwell Collins, took the reins at Boeing in early August. His high command was to right the ship.
The year started with a scary wind A door plug exploded from one of Boeing’s new 737 Max planes after it left the factory without the key bolts being reinstalled. The near disaster came as company leaders hoped to have regained the trust of regulators years after two fatal crashes that killed 346 people, the first six years ago this month.
Instead, Boeing’s rebuilding year is being pushed to 2025, and Ortberg is hinting at big changes ahead, promising workers and the public a greater focus on the 108-year-old company. Earlier this month, he said Boeing would cut 10 percent of its global workforce, about 170,000 people.
“We must be clear about the task ahead and realistic about the time it will take to achieve key milestones on the road to recovery,” he told workers in an Oct. 11 message. “We also need to focus our resources on performance and innovation in the areas that are core to who we are, rather than spreading ourselves across too many endeavors that can often lead to underperformance and underinvestment.”
Boeing’s new CEO Kelly Ortberg visits the company’s 767 and 777/777X program factory in Everett, Washington, U.S., on August 16, 2024.
Boeing | Marian Lockhart | Via Reuters
When Ortberg speaks at 10:30 a.m. ET Wednesday, investors will be on the lookout for clues about what a smaller Boeing might look like and what programs or assets could be on the chopping block.
“We believe [Boeing] is poised for further restructuring as the company looks to potentially divest parts of the portfolio and continues to focus on strengthening its supply chain,” RBC analyst Ken Herbert said in a note on Sunday.
Collecting cash
Boeing said earlier this month that it would publish one losses of nearly $10 a share for the third quarter and reported about $5 billion in charges at its defense and commercial businesses, where problems range from manufacturing defects on passenger planes to problems with a refueling tanker and the delay of two 747s that will serve as new Air Force One.
As it sheds cash, Boeing last week unveiled plans to raise up to $25 billion in debt or equity or a combination of the two. Ratings agencies have warned in recent weeks that Boeing could lose its investment grade rating, and the company plans to boost liquidity.
Fixing ties with workers, stabilizing the supply chain
The results of the union vote will be announced hours after the earnings call. Meanwhile, the strike is costing Boeing $1 billion a month, according to S&P Global Ratings estimates.
Workers had complained that a previous proposal was not enough to combat the rising cost of living in the Seattle area in the 16 years since the last contract was signed. During that time, high-paying jobs at tech companies flooded the area, driving up housing costs, the union said.
Boeing 737 on the ground in Renton, Washington.
Leslie Josephs | CNBC
Boeing also said it remains committed to building its next plane in the Puget Sound region, a major sticking point with workers who saw Boeing move 787 Dreamliner production to a non-union plant in South Carolina.
Deputy Labor Secretary Julie Sue met with both sides earlier this month to work on a deal.
“With the help of U.S. Deputy Secretary of Labor Julie Sue, we have obtained a negotiated proposal and resolution to end the strike, and it warrants presentation to members and deserves your consideration,” the International Union of Machinists and Aerospace Workers 751 said in a statement on Saturday.
The aerospace industry, which depends heavily on Boeing’s success, is appealing directly to President Joe Biden to help end the strike.
Boeing supplier Spirit AeroSystemswhich makes fuselages for the 737, last week said it would temporarily lay off 700 workers, but said it could resort to layoffs or more furloughs if the strike continues. Meanwhile, Boeing has cut orders for suppliers in various programs to conserve cash.
“Because the aerospace supply chain is vast and interconnected, the consequences of this strike extend beyond a single company, affecting countless suppliers across the country,” the Aerospace Industries Association wrote in a letter to Biden. “We urge you to continue to work with all parties involved to seek a prompt and just resolution as soon as possible, before the impact becomes even more severe.”