10 ms·

Boeing, expecting a long slump, will cut 16k jobs

189 points by ra7 7y ago

newacct583 7y ago
This is another situation where an industry deemed "essential", and unaffected directly by lockdown directives, is still impacted. While there's some ambiguity, nothing in the state-level lockdowns prevents travel in a meaningful way (it's just a jurisdictional thing). But no one is travelling anyway, because no one is willing to sit in an airplane right now. And Boeing sees that, and knows the recovery will be slow no matter when the official "end" of the lockdowns arrives.
- raiyu 7y ago
  Travel has certainly been a great deal affected, but the 737 Max was a pretty massive disaster in an of itself. With the coronavirus this is a huge 1-2 blow to Boeing. I wonder how much of their go forward business will be military contracts, as the their civilian aviation business seems to be dead for the next 3-5 years. They can get the 737 Max recertified to fly, but I think the damage to the reputation is done, so they probably will need to release a brand new plane to be competitive. Not sure on the design to production timeline for an airplane, but that's where I assumed 3-5 years.
  - newacct583 7y ago
    Actually in a cynical sense this may actually be good for Boeing (not in absolute terms, but in terms of market share). A downturn in the industry gives them more time to get a replacement ready before orders start picking up. The size of the market void into which Airbus could have jumped with extra A320 orders has shunk, basically.
    - choeger 7y ago
      Airbus cannot (or is unwilling to) ramp up production much either. In fact, I would expect job losses here too.
  - chx 7y ago
    > They can get the 737 Max recertified to fly, That is getting more and more dubious every day. Do you have a source which says this is doable? To recap, the 737 Max was not only fitted with the MCAS to save money but because it was relying on being grandfathered in to be able to be certified at all. So if they are forced to make so much change to the MCAS to require recertification they will fail doing so.
    - gizmo686 7y ago
      I thought the MCAS was to grandfather in pilots to be able to fly. Without it, the plain itself would still be certifiable; but pilots would need training before being allowed to fly it.
      - zerocrates 7y ago
        Basically all the issues of the Max come down to the pilot certification issue: the shared "type rating" with the prior 737s. That's why they needed to make the necessary changes to fit bigger engines on the old design, why they added MCAS to basically "simulate" more similar handling in some situations, and why they made so many decisions to downplay the existence of the system or offer new indicators or controls. The whole business case for the Max was to fend off the A320neo, and if airlines were going to have to retrain pilots, that's one less reason for legacy customers to stay.
        mrep 7y ago
        Sure, but they have already delivered about 400 of them and have another 400 built and waiting to be delivered. At 100 million a piece, that's 40 billion they will probably have to refund in some fashion if they scrap the ones delivered, and another 40 billion in sales waiting to be realized. Granted, they probably could get some money back by scrapping all of those planes, but I cannot imagine them losing more money training some pilots than refunding and scrapping all of those planes (at least for the currently built ones).
  - nawgszy 7y ago
    Airplanes are notoriously slow. I would expect turnaround on a new airframe to be over a decade, and on a new design at least 5 years. That said, I don't think a "new design" ontop of the 737 airframe exists. The whole point of the 737 Max and its failures is that the airframe was old so they tried to make a radical design change and handle the shortcomings in fly-by-wire software, but who on earth is going to trust Boeing with that now?
- jplayer01 7y ago
  > nothing in the state-level lockdowns prevents travel in a meaningful way (it's just a jurisdictional thing) ... yes, because if I travel to Canada, the first thing I want to do is be stuck in quarantine for two weeks. Are you serious?
  - Invictus0 7y ago
    Parent said state level as in states within the United States.
    - PeterisP 7y ago
      Boeing's market is global, and it does not matter if you can fly within USA if flights are shut down everywhere else - in the coming year any USA domestic airline will be able to get cheap planes from other airlines instead of buying new ones from Boeing. If global demand for flights is down even 20% then this means that the global demand for new planes is close to zero.
newswasboring 7y ago
> Boeing said it hopes to reach its job cut targets through voluntary means, including buyouts and early retirement offers. Employees who take the buyout will receive three months of health care and one week of pay for every year they have worked at Boeing, up to 26 years, the company told workers last week. I don't have any reference here because I have worked only in europe or asia, but is this a good offer? I don't think its a very good offer. Why will someone take this?
- ebiester 7y ago
  If someone is completely burnt out from their job or close to retirement already, they will take it. One week of pay per year is stingy, though, but they start with voluntary and move from there.
- wonderwonder 7y ago
  I guess it depends on the company. My wife's company's standard buyout is 2 weeks per year worked (she works in travel). 1 week of severance per year worked is not great. In the current economic environment I would think people would be very hesitant to take it. Lets say I have been there 10 years, means I only get 10 weeks severance. I still need to find a new job and there are tens of thousands of other laid off engineers competing for jobs and those jobs are very limited. Odds of finding a new one before severance runs out is low. If you don't take it you run the very real risk of getting cut with nothing. Unfortunate situation all around.
  - quaquaqua1 7y ago
    It would be very unfair for Boeing to offer 1 week per year served if you leave voluntarily, and then revoke that payment if they forcibly lay you off. At $OLD_TECH_CORPORATION_MAKING_DATABASES, we received one week per year served after being forced out, plus an additional "free month" of pay as well.
    - wonderwonder 7y ago
      sure, but the reality is that in the beginning of layoffs they will have larger reserves available for severance. As economic hardships mount those reserves will dwindle. Companies pretty much stopped caring about fair a long time ago unless you are lucky enough to have reached the C-Suite. Some companies alter the severance package based on nothing but how much your VP level officer likes you.
jhwang5 7y ago
The Boeing bailout was sold as a measure to keep jobs, then of course they turn around and do this.
- Aloha 7y ago
  Boeing has not taken a bailout, they didnt like the fact that the government would take an equity position. The bailout was as much targeted at Boeing suppliers as it was at Boeing itself.
  - jhwang5 7y ago
    Boeing was negotiating with gov to drop the equity requirement - does anyone know what the upshot was? They also did take money from other programs targeted at Airline industry, though I don't know exactly how much.
    - whatok 7y ago
      Boeing has received no bailout money.
- deleted 7y ago
  [deleted]
cotillion 7y ago
Boeing is one of few companies using program accounting. Won't this kind of slump drastically cut the number of planes they can distribute their development costs over for the 787 and 737 Max projects also?
- imglorp 7y ago
  That's what I wonder. More to the point, their stock is up 8% today on this news, because short term, this quarter, will look better with reduced costs. Who cares about the quarter after that, where production will have to be impacted by reduced workforce.
  - mason55 7y ago
    > Who cares about the quarter after that, where production will have to be impacted by reduced workforce. You were being sarcastic but you're kind of right. In the same way that this quarter isn't the be all-end all, neither is next quarter. Over, say, a 10 year time horizon, the next couple quarters will just be a blip. Plus, Boeing doesn't exist in a vacuum. The US Govt is going to let anything happen to them due to national security reasons and they've shown that they aren't willing to wipe out shareholders as part of a bailout. Frankly I'd be much more worried about the culture that allowed the 787MAX to happen than I would be about short-term COVID-19 reductions.
    - thephyber 7y ago
      I disagree that this quarter will be a blip, but I agree with the sentiment here. There are runways and parking lots in Washington full of undelivered planes which are waiting on contractual disputes related to the quality assurance of the 737 MAX issues. A significant percentage of Boeing planes are currently undeliverable and post-pandemic world airlines are likely going to cancel / downsize contracts or at least spend significant legal fees to attempt to do so. Barring a quick and easy vaccination or herd immunity that accidentally happens much faster than expected, travel is unlikely to recover this year and perhaps not next. Clearing their backlog of planes will likely take 4+ years unless the company can convince people and airlines to trust them again.
jdkee 7y ago
Nationalize Boeing in the interest of national secuirty.
- trianglem 7y ago
  No, capitalism is good we just have to reign it in like Europe and Asia.
  - bagacrap 7y ago
    Capitalism sort of implies competition...
    - ardy42 7y ago
      > Capitalism sort of implies competition... Actually, I don't think it does: https://www.lexico.com/en/definition/capitalism https://www.lexico.com/en/definition/capitalism: > An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. A privately-owned monopoly that ruthlessly crushes all competition is just as capitalistic as a privately-owned competitor in a market with perfect competition. The key concept is private ownership and control, not competition. Competition is is only required if you want the resulting system to have some positive externalities for consumers and society at large.
    - vkou 7y ago
      The only thing that capitalism implies is the existence of a class that does not work, but collects profits from the capital it owns. That class sees competition is an unnecessary, and a profit-reducing problem[1] that can be routed around. [1] See Thiel's monopoly essay.
      - Ididntdothis 7y ago
        Instead of aspiring to be capitalistic we should aspire to have a competitive market economy.
  - 7y ago
puranjay 7y ago
Can someone help me understand why the broader stock market is actually up compared to six months ago despite all these dire numbers being thrown around? Heck, Boeing stock is up today! The economy looked very rosy in October 2019 and NASDAQ was near 8300. Now it's 8900 even when millions are unemployed and even millions more furloughed. Should the stock market simply be seen as an isolated, self-contained entity with no real correlation to the broader economy?
- nikivi 7y ago
  Yes that is the case, some videos that help clarify it: https://www.youtube.com/watch?v=ZCFkWDdmXG8 https://www.youtube.com/watch?v=ZCFkWDdmXG8 https://www.youtube.com/watch?v=0ECqDaPjjV0 https://www.youtube.com/watch?v=0ECqDaPjjV0
- jquery 7y ago
  Short answer: fantastic ERs in Q3 and Q4. Spy is still 60-70 points down from its woulda-coulda place had covid not happened. Also: trillions in new spending causing asset inflation further lowering SPY below its price it would have if such spending happened without covid. Third reason: SPY yields are still above treasury (risk free) yields... significantly.
- samsonradu 7y ago
  Mostly because interest rates went from 1.75-2% to 0.25% and the FED balance sheet increased by 6T as we speak.
  - cobookman 7y ago
    Fed balance sheet increasing by 6T is huge! Fed is in-directly purchasing stocks, causing a price inflation.
- korethr 7y ago
  To a degree, yes. The stock market reflects investor sentiment about the viability of of the entities traded. If there's a notion that a company will be worth more in the future and will either pay out a nice dividend or can be later sold at a profit, shares of that company will be in demand and the price will go up. If the company is expected to be losing money and not be worth much or paying out a nice dividend in the future, prices will be going down as everyone tries to sell shares and not be the last one holding something worthless. If a company sheds a bunch of jobs, that can signal a number of things. One of the things it signals is that it has reduced its expenses. Reduced expenses means, all else equal, less chances of it running out of cash or hitting other kind of money problems, and thereby improves its chances of weathering the coming economic storm. If you thought that Boeing shedding a bunch of jobs meant that it had just secured it's ability to continue to exist and be more valuable once the coming recession/depression is over, would you not want to buy shares now to sell at a nice profit later?
jokit 7y ago
Boeing has been stealing contract money forever. Great investment, NASA.
- a3n 7y ago
  Stealing how, from who? Defense to Commercial?
lukewrites 7y ago
I read this as another step by Boeing to get rid of its unionized workforce in Washington in favor of plants in other states and in China. The market downturn provides a nice rationale for doing so.
- toomuchtodo 7y ago
  With $BA stock at a lower valuation, the union should go to the capital markets to perform a leveraged buyout and take control of the company. Likely better management material in the ranks than at the top.
tgsovlerkhgsel 7y ago
Weren't both Airbus and Boeing "booked out" with year-long order queues pre-Corona?
- a3n 7y ago
  Years long.
- avs733 7y ago
  in Boeing's case, a lot of that backlog is 737 max...which comes off the lime and immediately goes into storage, which (I'm guessing) means no delivery hand off and no booked income.

189 points by ra7 7y ago

This is another situation where an industry deemed "essential", and unaffected directly by lockdown directives, is still impacted. While there's some ambiguity, nothing in the state-level lockdowns prevents travel in a meaningful way (it's just a jurisdictional thing). But no one is travelling anyway, because no one is willing to sit in an airplane right now. And Boeing sees that, and knows the recovery will be slow no matter when the official "end" of the lockdowns arrives.

raiyu 7y ago
Travel has certainly been a great deal affected, but the 737 Max was a pretty massive disaster in an of itself. With the coronavirus this is a huge 1-2 blow to Boeing. I wonder how much of their go forward business will be military contracts, as the their civilian aviation business seems to be dead for the next 3-5 years. They can get the 737 Max recertified to fly, but I think the damage to the reputation is done, so they probably will need to release a brand new plane to be competitive. Not sure on the design to production timeline for an airplane, but that's where I assumed 3-5 years.
- newacct583 7y ago
  Actually in a cynical sense this may actually be good for Boeing (not in absolute terms, but in terms of market share). A downturn in the industry gives them more time to get a replacement ready before orders start picking up. The size of the market void into which Airbus could have jumped with extra A320 orders has shunk, basically.
  - choeger 7y ago
    Airbus cannot (or is unwilling to) ramp up production much either. In fact, I would expect job losses here too.
- chx 7y ago
  > They can get the 737 Max recertified to fly, That is getting more and more dubious every day. Do you have a source which says this is doable? To recap, the 737 Max was not only fitted with the MCAS to save money but because it was relying on being grandfathered in to be able to be certified at all. So if they are forced to make so much change to the MCAS to require recertification they will fail doing so.
  - gizmo686 7y ago
    I thought the MCAS was to grandfather in pilots to be able to fly. Without it, the plain itself would still be certifiable; but pilots would need training before being allowed to fly it.
    - zerocrates 7y ago
      Basically all the issues of the Max come down to the pilot certification issue: the shared "type rating" with the prior 737s. That's why they needed to make the necessary changes to fit bigger engines on the old design, why they added MCAS to basically "simulate" more similar handling in some situations, and why they made so many decisions to downplay the existence of the system or offer new indicators or controls. The whole business case for the Max was to fend off the A320neo, and if airlines were going to have to retrain pilots, that's one less reason for legacy customers to stay.
      - mrep 7y ago
        Sure, but they have already delivered about 400 of them and have another 400 built and waiting to be delivered. At 100 million a piece, that's 40 billion they will probably have to refund in some fashion if they scrap the ones delivered, and another 40 billion in sales waiting to be realized. Granted, they probably could get some money back by scrapping all of those planes, but I cannot imagine them losing more money training some pilots than refunding and scrapping all of those planes (at least for the currently built ones).
- nawgszy 7y ago
  Airplanes are notoriously slow. I would expect turnaround on a new airframe to be over a decade, and on a new design at least 5 years. That said, I don't think a "new design" ontop of the 737 airframe exists. The whole point of the 737 Max and its failures is that the airframe was old so they tried to make a radical design change and handle the shortcomings in fly-by-wire software, but who on earth is going to trust Boeing with that now?
jplayer01 7y ago
> nothing in the state-level lockdowns prevents travel in a meaningful way (it's just a jurisdictional thing) ... yes, because if I travel to Canada, the first thing I want to do is be stuck in quarantine for two weeks. Are you serious?
- Invictus0 7y ago
  Parent said state level as in states within the United States.
  - PeterisP 7y ago
    Boeing's market is global, and it does not matter if you can fly within USA if flights are shut down everywhere else - in the coming year any USA domestic airline will be able to get cheap planes from other airlines instead of buying new ones from Boeing. If global demand for flights is down even 20% then this means that the global demand for new planes is close to zero.

newswasboring 7y ago

> Boeing said it hopes to reach its job cut targets through voluntary means, including buyouts and early retirement offers. Employees who take the buyout will receive three months of health care and one week of pay for every year they have worked at Boeing, up to 26 years, the company told workers last week. I don't have any reference here because I have worked only in europe or asia, but is this a good offer? I don't think its a very good offer. Why will someone take this?

ebiester 7y ago
If someone is completely burnt out from their job or close to retirement already, they will take it. One week of pay per year is stingy, though, but they start with voluntary and move from there.
wonderwonder 7y ago
I guess it depends on the company. My wife's company's standard buyout is 2 weeks per year worked (she works in travel). 1 week of severance per year worked is not great. In the current economic environment I would think people would be very hesitant to take it. Lets say I have been there 10 years, means I only get 10 weeks severance. I still need to find a new job and there are tens of thousands of other laid off engineers competing for jobs and those jobs are very limited. Odds of finding a new one before severance runs out is low. If you don't take it you run the very real risk of getting cut with nothing. Unfortunate situation all around.
- quaquaqua1 7y ago
  It would be very unfair for Boeing to offer 1 week per year served if you leave voluntarily, and then revoke that payment if they forcibly lay you off. At $OLD_TECH_CORPORATION_MAKING_DATABASES, we received one week per year served after being forced out, plus an additional "free month" of pay as well.
  - wonderwonder 7y ago
    sure, but the reality is that in the beginning of layoffs they will have larger reserves available for severance. As economic hardships mount those reserves will dwindle. Companies pretty much stopped caring about fair a long time ago unless you are lucky enough to have reached the C-Suite. Some companies alter the severance package based on nothing but how much your VP level officer likes you.

jhwang5 7y ago

The Boeing bailout was sold as a measure to keep jobs, then of course they turn around and do this.

Aloha 7y ago
Boeing has not taken a bailout, they didnt like the fact that the government would take an equity position. The bailout was as much targeted at Boeing suppliers as it was at Boeing itself.
- jhwang5 7y ago
  Boeing was negotiating with gov to drop the equity requirement - does anyone know what the upshot was? They also did take money from other programs targeted at Airline industry, though I don't know exactly how much.
  - whatok 7y ago
    Boeing has received no bailout money.
deleted 7y ago
[deleted]

cotillion 7y ago

Boeing is one of few companies using program accounting. Won't this kind of slump drastically cut the number of planes they can distribute their development costs over for the 787 and 737 Max projects also?

imglorp 7y ago
That's what I wonder. More to the point, their stock is up 8% today on this news, because short term, this quarter, will look better with reduced costs. Who cares about the quarter after that, where production will have to be impacted by reduced workforce.
- mason55 7y ago
  > Who cares about the quarter after that, where production will have to be impacted by reduced workforce. You were being sarcastic but you're kind of right. In the same way that this quarter isn't the be all-end all, neither is next quarter. Over, say, a 10 year time horizon, the next couple quarters will just be a blip. Plus, Boeing doesn't exist in a vacuum. The US Govt is going to let anything happen to them due to national security reasons and they've shown that they aren't willing to wipe out shareholders as part of a bailout. Frankly I'd be much more worried about the culture that allowed the 787MAX to happen than I would be about short-term COVID-19 reductions.
  - thephyber 7y ago
    I disagree that this quarter will be a blip, but I agree with the sentiment here. There are runways and parking lots in Washington full of undelivered planes which are waiting on contractual disputes related to the quality assurance of the 737 MAX issues. A significant percentage of Boeing planes are currently undeliverable and post-pandemic world airlines are likely going to cancel / downsize contracts or at least spend significant legal fees to attempt to do so. Barring a quick and easy vaccination or herd immunity that accidentally happens much faster than expected, travel is unlikely to recover this year and perhaps not next. Clearing their backlog of planes will likely take 4+ years unless the company can convince people and airlines to trust them again.

jdkee 7y ago

Nationalize Boeing in the interest of national secuirty.

trianglem 7y ago
No, capitalism is good we just have to reign it in like Europe and Asia.
- bagacrap 7y ago
  Capitalism sort of implies competition...
  - ardy42 7y ago
    > Capitalism sort of implies competition... Actually, I don't think it does: https://www.lexico.com/en/definition/capitalism https://www.lexico.com/en/definition/capitalism: > An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. A privately-owned monopoly that ruthlessly crushes all competition is just as capitalistic as a privately-owned competitor in a market with perfect competition. The key concept is private ownership and control, not competition. Competition is is only required if you want the resulting system to have some positive externalities for consumers and society at large.
  - vkou 7y ago
    The only thing that capitalism implies is the existence of a class that does not work, but collects profits from the capital it owns. That class sees competition is an unnecessary, and a profit-reducing problem[1] that can be routed around. [1] See Thiel's monopoly essay.
    - Ididntdothis 7y ago
      Instead of aspiring to be capitalistic we should aspire to have a competitive market economy.
- 7y ago

puranjay 7y ago

Can someone help me understand why the broader stock market is actually up compared to six months ago despite all these dire numbers being thrown around? Heck, Boeing stock is up today! The economy looked very rosy in October 2019 and NASDAQ was near 8300. Now it's 8900 even when millions are unemployed and even millions more furloughed. Should the stock market simply be seen as an isolated, self-contained entity with no real correlation to the broader economy?

nikivi 7y ago
Yes that is the case, some videos that help clarify it: https://www.youtube.com/watch?v=ZCFkWDdmXG8 https://www.youtube.com/watch?v=ZCFkWDdmXG8 https://www.youtube.com/watch?v=0ECqDaPjjV0 https://www.youtube.com/watch?v=0ECqDaPjjV0
jquery 7y ago
Short answer: fantastic ERs in Q3 and Q4. Spy is still 60-70 points down from its woulda-coulda place had covid not happened. Also: trillions in new spending causing asset inflation further lowering SPY below its price it would have if such spending happened without covid. Third reason: SPY yields are still above treasury (risk free) yields... significantly.
samsonradu 7y ago
Mostly because interest rates went from 1.75-2% to 0.25% and the FED balance sheet increased by 6T as we speak.
- cobookman 7y ago
  Fed balance sheet increasing by 6T is huge! Fed is in-directly purchasing stocks, causing a price inflation.
korethr 7y ago
To a degree, yes. The stock market reflects investor sentiment about the viability of of the entities traded. If there's a notion that a company will be worth more in the future and will either pay out a nice dividend or can be later sold at a profit, shares of that company will be in demand and the price will go up. If the company is expected to be losing money and not be worth much or paying out a nice dividend in the future, prices will be going down as everyone tries to sell shares and not be the last one holding something worthless. If a company sheds a bunch of jobs, that can signal a number of things. One of the things it signals is that it has reduced its expenses. Reduced expenses means, all else equal, less chances of it running out of cash or hitting other kind of money problems, and thereby improves its chances of weathering the coming economic storm. If you thought that Boeing shedding a bunch of jobs meant that it had just secured it's ability to continue to exist and be more valuable once the coming recession/depression is over, would you not want to buy shares now to sell at a nice profit later?

jokit 7y ago

Boeing has been stealing contract money forever. Great investment, NASA.

a3n 7y ago
Stealing how, from who? Defense to Commercial?

lukewrites 7y ago

I read this as another step by Boeing to get rid of its unionized workforce in Washington in favor of plants in other states and in China. The market downturn provides a nice rationale for doing so.

toomuchtodo 7y ago
With $BA stock at a lower valuation, the union should go to the capital markets to perform a leveraged buyout and take control of the company. Likely better management material in the ranks than at the top.

tgsovlerkhgsel 7y ago

Weren't both Airbus and Boeing "booked out" with year-long order queues pre-Corona?

a3n 7y ago
Years long.
avs733 7y ago
in Boeing's case, a lot of that backlog is 737 max...which comes off the lime and immediately goes into storage, which (I'm guessing) means no delivery hand off and no booked income.