Boeing announced on Wednesday that it intends to cut commercial aircraft production rates and reduce its workforce by around 10 percent. The announcement came alongside the publication of Boeing’s first-quarter financial data, which showed a Q1 net loss of $641 million. According to Boeing, the staff cuts will be accomplished through “a combination of voluntary layoffs (VLO), natural turnover and involuntary layoffs as necessary.” The company says it will offer severance pay, COBRA health care coverage and career transition services to individuals affected by the involuntary layoffs.
“We’ll have to make even deeper reductions in areas that are most exposed to the condition of our commercial customers—more than 15% across our commercial airplanes and services businesses, as well as our corporate functions,” said Boeing CEO Dave Calhoun in a letter to employees. “At the same time, the ongoing stability of our defense, space and related services businesses will help us limit the overall depth of the cut.”
Boeing noted that its first quarter financial results were “significantly impacted” by the coronavirus (COVID-19) pandemic and the grounding of the 737 MAX. The company further stated that it will be reducing the 787 production rate to 10 per month in 2020 and to seven per month by 2022. However, the combined 777/777X production rate will drop to three per month in 2021 and 767 and 747 production rates will remain the same and Boeing expects to resume production of the 737 MAX at “low rates” in 2020 with a gradual increase to 31 planes per month in 2021.
Other financial steps taken by the company include reducing operating costs and discretionary spending, suspending dividend payments, extending an existing pause on stock buybacks, reducing or deferring R&D and capital expenditures, and accelerating some progress payment receipts. In addition, Calhoun and Chairman of the Boeing board of directors Lawrence Kellner have forgone their salaries for the year. According to Calhoun, the company is continuing to explore government funding options.