Kelly Ortberg’s first earnings report as Boeing Co. CEO has become suspenseful as employees vote on whether to accept the company’s latest proposal and bring an end to a five-week-long strike.
Boeing and the union representing 33,000 striking workers have reached a new tentative agreement that includes a 35% pay increase over four years, an unprecedented wage hike.
However, the final decision lies with the hourly workers who will vote on October 23, and approval is not guaranteed. In September, the workers overwhelmingly rejected a deal that had been endorsed by union leaders. This time, the union negotiators are not supporting the proposal.
The outcome of the vote, which requires a simple majority to pass, will not be known until late in the day in Seattle, Boeing’s main manufacturing hub. This leaves investors, employees, and executives in suspense after the earnings report, unsure if Boeing can begin to recover or continue struggling with low production and dwindling cash reserves.
The strike has been a significant challenge for Ortberg, who inherited multiple crises when he took over in August. He has already announced a 10% reduction in the workforce and put together a $25 billion refinancing package to stabilize the company over the next three years.
“If there’s a perception that his initial months have been lacking in success, this vote could be a significant step in changing that,” said Richard Aboulafia, an aerospace analyst.
The company is at risk of having its credit rating downgraded to junk if the strike persists, which would increase borrowing costs and hinder access to capital. This pressure also extends to Boeing’s supply chain, where layoffs could impede efforts to ramp up production once the strike ends.
The strike has strained Ortberg’s efforts to reset Boeing’s culture and employee relations. The announcement of job cuts and other measures threatens to worsen the already fragile relationship between senior management and employees.
Boeing’s confidence crisis extends beyond investors, with whistleblower accounts revealing unauthorized work and defects that suggest management prioritized production targets over quality.
Ortberg has tried to appeal to a sense of solidarity and has been more involved in day-to-day operations. He is considering structural changes, including potentially selling non-essential assets to focus on core businesses.
The strike has highlighted divisions within the company, with executives prioritizing returns while workers saw their wages eroded and pensions eliminated in a previous contract.
Despite a nudge from the White House, it is uncertain if the latest agreement will be accepted. The union leaders did not provide a recommendation on how members should vote on the deal.
Boeing will release its earnings before the US markets open on October 23, revealing missed revenue estimates and charges related to various programs.
Once the main factories in Seattle restart after the strike, the recovery process will begin, though it will be gradual due to the complexity of coordinating parts across the supply chain.
Analysts suggest that even if the strike is resolved in late October, it will take time for Boeing to fully recover and resume aircraft deliveries.
“Boeing is here to stay, but its future is uncertain,” wrote analyst Douglas Harned.