Boeing is bleeding cash and looking for a way to plug the wound. Will $10 billion do the trick?
According to a Bloomberg report from Tuesday, Oct. 1 , the troubled company is considering raising $10 billion by selling new stock. It’s not a done deal and sources said it likely would not happen until after the strike is resolved if it happens at all.
It’s expected that Boeing will have already burned through more than that amount of cash through the third quarter of this year.
"They are way behind in aircraft deliveries and losing market share fast to Airbus, and a lot of their customers are deeply aggrieved, understandably by this," aviation analyst Richard Aboulafia told Straight Arrow News. "And of course, there are doubts about their core product line in terms of, shall we say, the reliability of the manufacturing process. So to have a strike come on top of all of this is not good. "
The machinist strike is into its third week after the union refused to vote on what was supposedly Boeing’s "best and final" offer by Friday, Sept. 27. More than 30,000 machinists walked off the job in September. It’s the company’s first work stoppage since 2008.
The strike is preventing production of the best-selling 737 MAX and other jets at a time when the company is already struggling to meet deliveries. Boeing put in hiring freezes, furloughs, leadership pay cuts and more to plug the hole, but still the first two weeks of the strike cost the company, workers and shareholders $1.4 billion, according to Anderson Economic Group .
"The company’s large backlog of orders, and the fact that it is losing both current production and future parts and service business, mean that Boeing shareholders are effectively incurring losses every day this strike continues," AEG CEO Patrick Anderson said. "Boeing workers on strike are also losing, and as the strike goes on, more of Boeing’s suppliers will be forced to cut wages and hours."
Boeing’s stock is down about 40% in 2024. It’s putting Boeing on track for its worst annual performance since the financial crisis of 2008. While a new stock sale would dilute current shareholders, analysts say it could help the company keep its investment-grade rating.
Moody’s Ratings put Boeing’s ratings on review for downgrade following the strike, while Fitch Ratings said, "an extended strike could have a meaningful operational and financial impact, increasing the risk of a downgrade."
Striking union president Jon Holden told Seattle’s KUOW the union does not have any scheduled talks with Boeing this week. The last offer they received is the one they rejected last week. Holden said 80% of members say it didn’t meet their needs, while Boeing said they’re prepared to meet at any time.
"Our membership is tired of being impacted negatively by the decisions of upper leadership who have forgotten what the production system is all about and how it works and that the foundation of our production system is the most important thing," Holden said. "Now, this company needs to be profitable, and they need to ensure that their stocks are successful, but they also have to take care of the workers that build that profit."
The strike is far from the only dark cloud hanging over Boeing. Safety issues continue to come up, with the National Transportation Safety Board issuing an urgent safety recommendation Friday, Sept. 27, warning the rudder control component on some 737 models could get jammed in cold weather. Then, on Tuesday, Oct. 1, the NTSB scolded the Federal Aviation Administration in a letter, accusing it of not taking its warnings seriously.
To get the full picture of Boeing’s financial, cultural and safety problems, watch this interview.
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