Boeing HQ
Two key stories dominate the news for Boeing today. The first is the arbitration ruling on the Embraer joint venture in which Boeing will pay Embraer $150 million for not moving forward with the JV. This appears to be a win and a bargain for Boeing, as expectations were in the $300-$400 million range. Of course, it also doesn’t come at a good time for Boeing, which is in the midst of a cash crunch.
The second is the impact of the strike on Boeing, and actions the company is taking to reduce its losses and maintain its investment grade credit rating. We believe that even with Boeing taking actions such as no executive raises and temporary layoffs and other actions aimed at reducing costs, it is likely to lose its investment grade rating.
Moody’s, one of the key rating agencies, has advised Boeing to avoid new debt if it wants to maintain its investment grade rating. Given that the company is likely losing $100 million plus per day, that is unlikely unless Boeing is willing to dilute shareholders and issue new equity at a extremely high discounted rate to where the stock price was before the 737 MAX crisis. The company is, financially, “between a rock and a hard place.”
Looking at the run-up to the strike, some observers indicate that Boeing’s management was blindsided by the contract rejection. The rejection of the negotiated deal recommended by union management apparently took management by surprise, especially with the votes to reject the contract and strike in the high ninety percent range.
Question also have emerged on what the impact of the strike may have on the Spirit AeroSystems deal, and whether the union agreement eventually reached in Seattle could be applied if employees vote to unionize in Wichita. The economic details won’t be lost on Wichita employees, who will likely vote based on their wallets.
Finally, as the news about Starlink is winding down, the astronauts commented on their situation. Butch Wilmore indicated that after the problems with Starliner, he wasn’t comfortable getting back into the capsule for the trip home. While this differs with earlier statements before the craft safely reached home, it may reflect additional concerns privately expressed by the astronauts. Effectively, that was a vote of ‘no confidence’ in the Boeing capsule.
Links to today’s key stories follow:
- Boeing to pay $150M over failed Embraer joint venture – AirInsight
- Boeing’s CFO says business ‘in difficult position.’ Read memo to employees – FOX Business
- Boeing considers temporary layoffs to cut costs during Machinists strike – Seattle Times
- Moody’s advises Boeing to avoid new debt – IFR
- Boeing bosses blindsided by strike, on brink of crisis – AJOT
- Economics expert weights in on how Boeing strike could impact Spirit sale – KWCH
- Stranded astronaut says he wasn’t “comfortable” getting “back into Starliner” after safety issues – Futurism
