Boeing CEO Message to Employees on Positioning for the Future

Rhea-AI Summary

Boeing [NYSE: BA] CEO Kelly Ortberg announced significant changes to address the company's challenging position. Key points include:

• Delay of 777X program, with first delivery now expected in 2026
• Conclusion of 767 Freighter commercial production in 2027
• Substantial new losses expected in Boeing Defense, Space & Security (BDS) division
• Workforce reduction of approximately 10% across all levels
• Cancellation of next furlough cycle

Ortberg emphasized the need for structural changes to ensure competitiveness and customer delivery. The company will focus on core areas, reallocating resources to improve performance and innovation. These decisions aim to reset Boeing's workforce levels and align with financial realities and priorities.

Positive

• Continued production of KC-46A Tanker
• Focus on core competencies to improve performance and innovation
• Cancellation of next furlough cycle

Negative

• 777X program delayed to 2026
• Conclusion of 767 Freighter commercial production in 2027
• Substantial new losses expected in Boeing Defense, Space & Security (BDS) division
• Workforce reduction of approximately 10% across all levels
• Ongoing work stoppage affecting program timelines
• Poor performance on fixed-price development programs in BDS

Insights

Financial Analyst

This announcement from Boeing's CEO is highly impactful for investors. The company is facing significant challenges, including delays in the 777X program, with first delivery now expected in 2026. The decision to end 767 Freighter production by 2027 signals a major shift in product strategy. Boeing Defense, Space & Security (BDS) is experiencing substantial losses, particularly in fixed-price development programs. The planned 10% workforce reduction is a drastic measure that will affect all levels of the organization. These actions indicate severe financial strain and operational difficulties. The market is likely to react negatively to these developments, as they suggest prolonged recovery timelines and potential market share losses to competitors. Investors should closely monitor Boeing's ability to execute these restructuring plans and their impact on future financial performance.

Aerospace Industry Expert

Boeing's announcement reveals deep-rooted issues across its commercial and defense segments. The 777X delay to 2026 is particularly concerning, as it's been plagued by development challenges and regulatory scrutiny. This pushback could benefit Airbus, potentially allowing them to gain ground in the wide-body market. The decision to end 767 Freighter production, while maintaining the KC-46A Tanker line, shows a strategic pivot towards defense contracts. However, the mention of "substantial new losses" in BDS is alarming, suggesting systemic issues in program management and cost control. The 10% workforce reduction is a double-edged sword - it may improve efficiency but could also lead to loss of critical expertise. These changes indicate a company in crisis mode, attempting to streamline operations and cut costs. The success of these measures will be important for Boeing's long-term competitiveness in the aerospace industry.

ARLINGTON, Va., Oct. 11, 2024 /PRNewswire/ -- Boeing [NYSE: BA] President and CEO Kelly Ortberg shared the following message with all employees today:

Team,

Our business is in a difficult position, and it is hard to overstate the challenges we face together. Beyond navigating our current environment, restoring our company requires tough decisions and we will have to make structural changes to ensure we can stay competitive and deliver for our customers over the long term.

We need to be clear-eyed about the work we face and realistic about the time it will take to achieve key milestones on the path to recovery. We also need to focus our resources on performing and innovating in the areas that are core to who we are, rather than spreading ourselves across too many efforts that can often result in underperformance and underinvestment.

With that in mind, today I am sharing some difficult decisions and several program updates: 

• On the 777X program, the challenges we have faced in development, as well as from the flight test pause and ongoing work stoppage, will delay our program timeline. We have notified customers that we now expect first delivery in 2026.
  
  
• We plan to build and deliver the remaining 767 Freighters ordered by our customers and then conclude production of the commercial program in 2027. Production for the KC-46A Tanker will continue.
  
  
• In BDS, our performance on fixed-price development programs is simply not where it needs to be. We expect substantial new losses in BDS this quarter, driven by the work stoppage on commercial derivatives, continued program challenges and our decision to complete production on the 767 freighter. I will be providing additional oversight of this business and these programs.

Along with the above actions, we must also reset our workforce levels to align with our financial reality and to a more focused set of priorities. Over the coming months, we are planning to reduce the size of our total workforce by roughly 10 percent. These reductions will include executives, managers and employees. Next week, your leadership team will share more tailored information about what this means for your organization. Based on this decision, we will not proceed with the next cycle of furloughs. 

As we move through this process, we will maintain our steadfast focus on safety, quality and delivering for our customers.  We know these decisions will cause difficulty for you, your families and our team, and I sincerely wish we could avoid taking them. However, the state of our business and our future recovery require tough actions.

We will be transparent with you regarding the timing and impact of these steps, and we will be professional and supportive to everyone along the way. 

Thank you for all that you are doing through this very challenging time at Boeing. We will navigate through this moment. We will re-focus our company, and we will restore trust with all those who depend on us.

Kelly

Contact
Boeing Media Relations
media@boeing.com

View original content:https://www.prnewswire.com/news-releases/boeing-ceo-message-to-employees-on-positioning-for-the-future-302274309.html

SOURCE Boeing

FAQ

When is the new expected delivery date for Boeing's 777X program?

According to the press release, Boeing [NYSE: BA] now expects the first delivery of the 777X program in 2026, due to development challenges, flight test pause, and ongoing work stoppage.

What is happening to Boeing's 767 Freighter production?

Boeing [NYSE: BA] plans to build and deliver the remaining 767 Freighters ordered by customers and then conclude production of the commercial program in 2027. However, production for the KC-46A Tanker will continue.

How much is Boeing planning to reduce its workforce?

Boeing [NYSE: BA] is planning to reduce the size of its total workforce by approximately 10%, including executives, managers, and employees, over the coming months.

What is the current status of Boeing's Defense, Space & Security (BDS) division?

Boeing [NYSE: BA] expects substantial new losses in its BDS division this quarter, driven by the work stoppage on commercial derivatives, continued program challenges, and the decision to complete production on the 767 freighter.