Good morning. Following aircraft malfunctions and a series of mismanagement missteps, The Boeing Company has a major new dilemma on its hands: Thousands of its workers just walked off the job. In response, CFO Brian West is to cut costs. But will doing so risk creating long-term damage in the form of employee morale sinking even lower?
The latest ordeal for Boeing began on Thursday when about 33,000 unionized workers in the Pacific Northwest voted overwhelmingly to reject a tentative, last-minute agreement reached between the company and the union leadership. Boeing proposed a 25% wage increase over four years and other improvements to health care and retirement benefits, but the union had sought raises of about 40%. The strike began on Friday.
My Fortune colleague Shawn Tully points out that the strike is a big challenge for the company amid a recent string of big losses. “In the first half of 2024, Boeing bled $8.3 billion in free cash flow,” Tully writes. “News of the ‘no’ vote pounded its stock by almost 5.7% on Sept. 13, its shares closed around $158, their lowest level for 2024, and one-third below its price at the year’s start.”
Meanwhile, rating agencies are considering downgrading the company’s debt to junk and the stock continues to falter, Fortune reports. Boeing is now led by new CEO Robert “Kelly” Ortberg, who came out of retirement to take the job last month.
The company has outlined a series of cost-cutting measures. Among them are: a hiring freeze, reducing travel, delays in pay raises, and temporary layoffs. As CFO, West wrote in a letter to employees on Monday that these actions "will create some uncertainty and concern." He added: “This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future.” Boeing is "working in good faith" to reach a new contract agreement with the unionized workers, West said.
Actions such as hiring freezes and furloughs are immediate cash-saving measures that will impact the bottom line, Jason Walker, founder of Thrive HR Consulting, told me. This is a pretty standard approach when you are worried about the amount of cash you are going to have on hand, he said. Walker has many years of experience as a chief people officer working with C-suite members, such as CFOs.
However, there can be a downside to these practices. When you make this kind of decision, especially if you are Boeing, it only adds to the cultural woes of the company, Walker said. “Employees already have a dim view of management, and this is just going to make it worse; I think they are really in a death spiral of their own making,” he said.
Boeing needs to figure out how to more consciously connect with employees. He added: "From whistleblower lawsuits, the new CEO buying a $4.1 million house, quality issues, and now this—the bad optics just keep going.”
Being laser-focused on the financial aspects of the company is a finance chief's job, Walker said. However, at times, some CFOs may have "complete disregard for the people side of the business," and employees usually figure that out quickly, he said.
Sheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were curated by Greg McKenna
