Boeing HQ
Today’s key news centers about whether a tentative deal reached between the IAM and Boeing will be ratified by the rank and file, who will vote on the proposal Wednesday. That is the same day that Boeing will report its earnings, and leave a key issue unanswered during the conference call – whether the strike will end.
Our sources indicate that continued anger within the IAM membership may be strong enough to also vote this down, and we give ratification a 50/50 probability. We will see once the results are tabulated on Wednesday. It is notable that this was not described as a “best and final” by Boeing as was an earlier offering that was neither their best nor final offer. Boeing clearly needs the strike to end soon, from a financial standpoint, and hopes for ratification.
In other financial news, the WSJ is reporting that Boeing is considering asset sales to strengthen the company’s financial position. While one small defense program is already reported as being spun off, the question is how large could other divestitures be? Stay tuned.
Meanwhile, under the headlines, the FAA has opened a new oversight review into Boeing’s safety practices. This comes after Congressional testimony by the Inspector General’s office of the DOT that eviscerated the FAA’s oversight of the company. The FAA Administrator responded that fixing those problems will likely be a three to five year task. The key question is how quickly can Boeing ramp its 737 production while waiting for the FAA to play catch up and more effectively execute its oversight responsibilities. MAX production is currently limited to 38 per month, and now appears unlikely to be increased soon.
An article about what’s going on with Boeing 737 planes talks about the delayed response from the FAA to an urgent request from the NTSB and a multi-operator message from Boeing. Tie this to an FAA that needs strengthening and it appears more roadblocks, rather than fewer, are likely for the future.
The impact of the Boeing strike is impacting the supply chain.  Spirit Aero is to furlough 700 workers for three weeks due to the Boeing strike, given a backlog of fuselages for the MAX. If the strike continues, Spirit Aero won’t be the only supplier laying off employees.
Finally, reports from Brazil confirm that Embraer is looking at the possibility of entering the mainline jet market with a competitor to the 737MAX and A320neo families. That would certainly change the duopoly, as Embraer has the engineering talent and support network to become a major competitor.  All it needs is some sovereign wealth funds investment.   Stay tuned.
Links to today’s key news follows:
- Striking Boeing workers make earnings day a cliffhanger for CEO – Bloomberg via Yahoo
- Boeing workers to vote on new wage deal that could end strike – Reuters
- Boeing considering asset sales to strengthen financial position: report – NewsBytes
- US FAA opens new oversight review into Boeing safety practices – Reuters via Yahoo
- What is going on with Boeing 737 planes? – Financial Express
- Spirit Aero to furlough 700 workers for 21 days due to Boeing strike – Reuters
- Embraer explores potential entry into Boeing 737 market amid industry shifts – Rio Times
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