Boeing HQ
Boeing news today focuses on the company’s registration to raise up to $25 billion in additional equity and a credit agreement with a consortium of banks for an additional $10 billion of debt. With the additional equity, Boeing may be able to maintain the lowest investment grade credit rating – important for its interest expense costs should they lose it. With a total potential infusion of $35 billion, that should prevent the ‘specter of Chapter 11 bankruptcy protection’ in the near term.
The latest reports from Seattle indicate that the Boeing staffing cuts will primarily be white-collar employees, as the IAM union on strike is not impacted by the staffing cuts. This is particularly puzzling to industry experts, including us, with Boeing, when they are behind of virtually every program. Late programs include certification of the 737-7, 737-10, 777-9, 777-8 and 777-8F, compounded by continuing ‘quality escapes’ on the 737-8, 737-9, 787, and the KC46A tanker. Projects that are behind schedule typically need more, rather than fewer, resources to get back on schedule.
India keeps popping up as a potential area of investment for Boeing, with a willing government willing to finance facilities and offer tax breaks. Could there be a final assembly line in India’s future? Boeing has grown from 1,500 to 7,000 employees in India over the last five years, and with India a key market for the 737 MAX, opportunities for further supply chain diversification and MRO certainly exist in the near term.
The IAM strike has passed the one month mark as the US Secretary of Labor intervenes to try and break the impasse. Our sources indicate this may be a longer strike than initially anticipated after Boeing’s ‘best and final’ offer and cutting health care for strikers created additional, and unnecessary animosity.
Links to today’s key news follow:
- Boeing to raise as much as $25 billion to stave off cash crunch – Bloomberg via Yahoo
- Boeing’s crisis is getting worse. Now its borrowing tens of billions of dollars – CNN via WHDH
- Boeing layoff plan suggest deep white collar job cuts – Seattle Times
- Strike-hit Boeing leaves experts puzzled by strategy – AFP via Barron’s
- India has opportunity to create next generation products: Boeing – Business Standard
- Boeing factory strike crosses 1-month mark as pressure mounts on new CEO – CNBC via NECN
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