SEATTLE/PARIS (Reuters) – Boeing Co (BA.N) is freezing new hiring and overtime except in certain critical areas in efforts to preserve cash due to the coronavirus outbreaks and the 737 MAX grounding, people familiar the matter said on Wednesday.
Layoffs or furloughs were also a “real possibility” but were seen as a separate, later action, one of the people said. A second industry source said job cuts were likely as the aviation industry is squeezed by plummeting travel demand and a safety ban on the 737 MAX after two fatal crashes hit the one-year mark.
A Boeing official said there were no plans at this time for job cuts but the company was closely monitoring business conditions.
Boeing CEO Dave Calhoun told employees on Wednesday in a memo seen by Reuters that the company was taking steps to address the business pressures that result from “the pain our customers and suppliers are feeling.”
“It’s critical for any company to preserve cash in challenging periods,” Calhoun said.
The cash preservation strategy comes as Boeing scrambles to curb fallout from the year-old grounding of its money-spinning 737 MAX after crashes in Ethiopia and Indonesia killed 346 people five months apart.
The worldwide safety ban wiped billions off the company’s value and sparked hundreds of lawsuits from bereaved families.
Boeing’s shares were down roughly 11 percent on Wednesday to a 32-month low on weak orders and plans to draw down the rest of a $13.8 billion loan.
Boeing took the extraordinary step of preserving production staffing levels when shutting down 737 MAX production earlier this year in order to be ready to ramp back up when the 737 MAX wins regulatory approvals to return to service.
But the depth of the coronavirus outbreaks and the demand by airlines to defer orders and delay pre-delivery payments has increased pressure on Boeing and forced it to consider tougher steps to reduce cash outflow, the people said.
Boeing however will want to avoid as much as possible cutting into the resources needed for a smooth ramp up in production, the people said. Losing workers to other companies in a tight labor market or training new ones would complicate such efforts.
“You’ll hear from us often through this uncertain period ahead,” Calhoun told employees. “We’ll be clear about the challenges. And we’ll be transparent as we consider additional affordability measures.”
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