It was to be expected that Boeing’s new number one Kelly Ortberg would find a much more serious situation than he feared. His long experience in the American aerospace giants – He comes from Rockwell Collins – has certainly helped him in understanding the numbers, situations and projects, and now the bitter cure that one would have liked to avoid becomes a necessity. The announcement, made last Friday, leaves few illusions and involves a 10% cut in the global workforce, therefore around 17,000 units. Not only that, the program for the certification of the B-777X, currently suspended after a technical problem occurred with the engine attachments, is still getting longer and the first delivery may not be made until 2026, i.e. six years after the initial forecasts . Translated: apart from possible penalties to be deducted from the price agreed with customers, there is the possibility that other carriers cancel orders, worsening the situation. Furthermore, the ongoing strikes to demand better wages, an action which sees the participation of over 25,000 people, are also causing problems for the Defense sector, which has always been a source of secure revenue for the US aerospace giant. When the unrest began in mid-September, Ortberg had urged workers to “embrace the future and not hold grudges”, managers accepted pay cuts in solidarity, but this is unfortunately not enough. Last Friday Ortberg wrote to employees announcing the reduction in staff to realign expenditure to the financial situation put in crisis by the loss of revenue due to the blocking of production of some of the most widespread models, namely the B-737 Max, the B-767 and B-777. But the “cut” will be horizontal with respect to tasks, hitting executives, managers and employees. Boeing has factories and offices in around 65 countries and, inevitably, the international network will also be involved, as is already happening in Brazil, where even the internship program announced for 2025 has been suspended. This is just one example, but the the idea was to offer 36 positions for engineering students, double compared to this year, with a selection in which around 2,700 students applied for 18 places. Certainly not a huge expenditure chapter, probably a drop in the ocean, but also measures like this could contribute to reducing the figure of five billion dollars that the company will have to pay out in the third quarter of 2024, foreshadowing a terrible result for the budget of end of the year, perhaps even worse than that due to the 2008 crisis. Also because it seems that the cash today sees only less than ten billion in total.
After the accidents to the B-737Max in recent years and the one – fortunately without victims – to the Alaska Airlines flight which occurred in January this year, investigations and analyzes of company processes have revealed that a defined culture had established itself over the last 25 years “toxic and corrosive” which exerted constant pressure on costs and planning, always putting them at the forefront of decision-making processes to the detriment of quality and skills. Since the beginning of the summer, that is, since the shareholders’ meeting appointed Ortberg as the new CEO, the manager has taken very clear decisions, such as removing the head of the defense and space division Ted Colbert and trying to stop the strike by directly accepting the workers’ request, a move which however backfired and strengthened the union’s determination.
On Friday, October 11, Ortberg told employees: “We must be clear-eyed about the work ahead and realistic about the time it will take to reach key milestones on the road to recovery; we must also focus our resources on performance and innovation in the areas that are core to who we are.” This is an admission about the state in which he found the company, such that the application of the cuts should have been made regardless of his arrival. According to various internal sources, the manager’s industrial program would envisage a decisive strengthening of the commercial aviation sector, an operation which however involves very long times, even years, as recently commented by a high-level official of the US aeronautical authority, i.e. the Federal Aviation Administration. In the meantime, however, Ortberg must prepare to report to investors on October 23, when they will want more details on how he intends to definitively guide what promises to be one of the most difficult restructuring procedures in American industrial history. Meanwhile, rating agencies have warned Boeing of the possibility of revising their assessment on the safety of investments, a move that would make it difficult to find fresh liquidity. Bank of America analyst Ron Epstein, in a note to his clients and potential investors, wrote: “For every problem that surfaces and is resolved, others arise, the problems feeding each other, creating a continuous cycle of difficulty which aggravates the negative impacts.” On a programmatic level, Boeing still has to complete the reacquisition of Spirit AeroSystems, a holding company that it had spun off almost two decades ago, as well as putting the space division back in order after the disgrace it made in recent months with the problems with the Starliner capsule, which as a precaution returned to Earth without astronauts. edge. And so on the one hand Ortberg wants to instill a sense of urgency and shared sacrifice, on the other the move threatens to further antagonize the workers the company needs to revive the production of commercial jets, currently in great demand by companies to complete the recovery and renewal plan for the fleets underway since the post-pandemic period.
