Workers sit outside a Boeing manufacturing facility during a strike in Renton, Washington, US, on Thursday, October 3, 2024.
David Ryder | Bloomberg | Getty Images
BoeingNew CEO Kelly Ortberg said the company is reviewing its various businesses and laying out a vision for a leaner future at the struggling plane maker ahead of his first quarterly call with analysts on Wednesday. Meanwhile, thousands of striking Boeing mechanics will vote on a new labor contract, and Ortberg said he hopes an agreement can be reached.
“We're currently going through a portfolio process to look at the overall portfolio and see what we want to look like five years from now. That may include simplifying certain things,” Ortberg said in an interview on CNBC's “Squawk on the Street.” on Wednesday. He added that no decisions have been made yet. “I believe our core business of commercial aircraft and core defense products will always remain with Boeing.”
“I would rather err on the side of doing less and better than doing more and not doing it well, and I think there are some cases where we can do less and do better,” he said.
Quarterly losses
Boeing reported a loss of more than $6 billion in the third quarter, the largest since 2020 when the pandemic halted most demand for planes and its best-selling plane was grounded after two accidents.
Boeing released preliminary third-quarter results earlier this month, showing revenue of $17.8 billion, down less than 2% from a year earlier, as well as a loss of $9.97 per share and operating cash flow of $1.3 billion. It disclosed more than $5 billion in charges across its commercial and defense units and said it ended the third quarter with $10.5 billion in cash and marketable securities.
Losses at its commercial aircraft unit swelled to more than $4 billion from a loss of $678 million the previous year. The accusations were related to an additional delay in the debut of its 777X widebody aircraft until 2026 and another delay related to the 767. Boeing plans to end production of the 767 when orders are satisfied in 2027.
Its defense unit lost $2.4 billion in the third quarter from $924 million in the same period in 2023, with charges tied to several programs, including the KC-46 tanker and the troubled Starliner carrier. An empty Starliner capsule returned from the International Space Station this summer, without the two NASA astronauts it originally carried into space.
Ortberg announced the departure of Defense Unit CEO Ted Colbert in September.
When asked by CNBC about the Starliner problem, Ortberg said: “My reaction is that we have to improve our systems engineering and design capabilities so that this never happens again.”
Here's what the company reported versus what Wall Street analysts surveyed by LSEG, formerly known as Refinitiv, expected:
Loss per share: $10.44 adjusted vs. adjusted loss of $10.52 Revenue: $17.84 billion vs. $17.82 billion expected
Ortberg, the former CEO of Rockwell Collins, took over the helm of Boeing in August, tasked with restoring the company's reputation and eliminating quality problems in airplanes and other programs. In January, a door plug exploded minutes into an Alaska Airlines flight on a 737 Max 9 after key screws were not reinstalled before the plane left the Boeing factory. The near-disaster raised safety concerns from regulators and customers.
“We need to know what's going on, not just with our products, but also with our employees,” Ortberg said in prepared remarks Wednesday ahead of the earnings call. “More importantly, we need to prevent problems from getting worse and work better together to identify, fix and understand the root cause.”
Ortberg acknowledged that it will take some time to turn the ship around but was optimistic that the company could ramp up production of its best-selling 737 MAX planes once the strike ends.
“We have employees who are hungry to return to the iconic company they know and set the standard for the products we offer,” he said.
Ortberg said earlier this month that Boeing would cut 10% of its global workforce of about 170,000 people, in reference to a leaner manufacturer. He is expected to face questions during the call about which units or projects the company will consider getting rid of.
“We need to reset priorities and create a leaner, more focused organization,” he said in his prepared remarks.
Ongoing strike
The most pressing issue for Boeing this week is ending a costly labor strike that has crippled its factories in the Seattle area, where most of its planes are produced. More than 32,000 mechanics left their jobs early on Sept. 13, about two weeks before the end of the quarter, after voting overwhelmingly on a contract that included 25% raises, among other changes. The new proposal, unveiled Saturday, includes 35% raises over four years, a higher signing bonus and 401(k) contributions, and other improvements.
The strike is costing Boeing $1 billion a month, according to S&P Global Ratings, and a quick outcome is crucial to the airline's fragile supply chain, where furloughs have already begun.
“We worked feverishly to find a solution that would fit the company and meet the needs of our employees,” Ortberg said.
The deal includes a commitment from Boeing to build its next aircraft in the Pacific Northwest. It has been a sore point for union mechanics after Boeing moved its 787 Dreamliner production to a non-union facility in South Carolina.
“Boeing is an aircraft company, and at the appropriate time in the future we need to develop a new aircraft. But we have a lot of work to do before then,” Ortberg said on Wednesday.
Analysts are optimistic about the approval of the deal. The results of the Labor vote are expected late Wednesday night.
— CNBC's Phil LeBeau contributed to this article.
