Striking Boeing Workers Make Earnings Day a Cliffhanger for CEO
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(Bloomberg) -- Kelly Ortberg’s earnings debut as Boeing Co. chief executive officer has gained an element of suspense as workers vote on the same day whether to accept the planemaker’s latest proposal and end a five-week-long strike.
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Boeing and the union representing 33,000 striking members hammered out a tentative new accord that notches up pay by 35% over four years, an unprecedented wage increase.
But the hourly workers have the final say with their Oct. 23 vote, and approval is far from certain. They overwhelmingly rejected a deal in September that had labor leaders’ blessing. This time, union negotiators around aren’t endorsing the proposal.
The outcome of the vote, which needs a simple majority to pass, won’t be known until late in the day in Seattle, Boeing’s main manufacturing hub. That means investors, employees and executives will be left hanging for hours after the earnings, uncertain as to whether Boeing can finally start on the path to recovery — or be forced to keep muddling through with anemic production and dwindling cash reserves.
The strike has become a defining episode for Ortberg, who inherited a set of interlocking crises when he took over in early August. He’s already announced a 10% workforce reduction that will sweep across all ranks of the planemaker, and he put together the first contours of a $25 billion refinancing package that aims to steady the company in the next three years.
“If there’s this perception that his first couple of months have been somewhat unblemished by success, this would be a terrific step in turning that around,” Richard Aboulafia, an aerospace analyst at Aerodynamic Advisory LLC, said of the contract vote. “It would de-risk an incredibly dangerous situation.”
The manufacturer faces the threat of its credit rating being cut to junk if the work stoppage drags on, a move that would increase borrowing costs and impede its access to capital. The squeeze extends to Boeing’s fragile supply chain, where any staffing cuts could hurt efforts to speed up factories again after the strife ends.
Ortberg’s efforts to reset Boeing’s culture and relations with employees have been hurt by the strike. The announcement of job cuts, alongside a wide range of other measures, threatens to drive a wedge into the already fragile rapport between senior management and the shop floor.