Boeing Co. is signaling a potential move to bolster its financial position by raising up to $25 billion through the sale of stock or new debt issuance over the coming three years. This comes after the aerospace giant has faced significant financial challenges, losing more than $25 billion since the start of 2019. The company's financial strain is compounded by an ongoing strike of workers in the Pacific Northwest, who build parts and many of Boeing's commercial jets. With the strike entering its second month, it's impacting Boeing's cash flow, which relies heavily on the delivery of new aircraft to customers.
The company had expended over $1 billion in cash and finished September with $10.3 billion in liquidity, part of which includes investment securities like bonds. In a significant cost-cutting measure, newly appointed CEO Kelly Ortberg announced a 10 percent reduction in workforce, translating to approximately 17,000 job cuts across its global operations. With a worldwide workforce of about 170,000, Boeing has a significant presence in manufacturing hubs like Washington and South Carolina. Specifically, Boeing's workforce in South Carolina was at 7,864 at the year's start, marking the highest count since the company launched operations in North Charleston in 2009.
Temporary furloughs had previously been implemented due to the strike, but Ortberg indicated these would be halted with the planned layoffs. The labor strike also impacted production schedules, halting the output of Boeing’s current 777 model and the high-demand 737 Max. Notably, the production of the 787 Dreamliner, manufactured at a nonunion plant in North Charleston, has not ceased but suffered delays. Analysts from Bank of America have reported disruptions due to the closure of a Seattle-area plant responsible for the 787's vertical fin tail sections, although a Utah facility making the same component remains operational.
As of mid-October, no new aircraft rollouts occurred, though one delivery was completed. In its strategic financial maneuvers, Boeing has filed 'shelf registrations,' a standard procedure for corporations seeking to raise funds without committing outright. Additionally, Boeing has secured a $10 billion supplemental credit agreement with prominent U.S. banks. According to Fitch Ratings, these actions enhance Boeing's financial flexibility and mitigate immediate liquidity concerns. By accessing capital markets beyond debt, Boeing aims to ease downgrade risks by securing its capability to repay debt maturing in 2025 and 2026.
However, there may still be a threat to Boeing’s credit rating, as Standard & Poor's announced its potential consideration of a downgrade last week. Despite these financial challenges, Boeing's shares saw a rise of over 2 percent, indicating some investor confidence.
