The troubled plane manufacturer had to tell it like it is in a new stock prospectus
As it treads water awaiting the end of its machinists’ strike, Boeing $BA (BA) just formally announced Monday that it’s raising $19 billion in a stock offering. And in the prospectus for that share sale, it lays out exactly how immensely the work stoppage looms in its conception of the future.
When companies sell stock to the public, they have to inform the public of the risks inherent to that investment. The biggest one facing Boeing at the moment is that it won’t get workers back to assembly lines soon. In Boeing’s form 424B5, the category of Securities and Exchange Commission filings under which a prospectus falls, the planemaker tees up its fiercest headache under a section headlined “Risks Related to Our Business and Operations.”
“Some of our and our suppliers’ workforces are represented by labor unions,” the company says. “Work stoppages by our employees are currently adversely affecting our business, financial condition, results of operations and/or cash flows. Future work stoppages by our or our suppliers’ employees could also adversely impact our business.”
That’s putting it lightly, but in corporatese, Boeing reveals its onion layers of stress bit by bit.
Corporatese:
Approximately 57,000 employees, which constitute 33% of our total workforce, were union represented as of December 31, 2023 under collective bargaining agreements with varying durations and expiration dates.
Translation: We have a lot of union workers.
Corporatese:
On September 12, 2024, our contract with the International Association of Machinists and Aerospace Workers District 751 (“IAM 751”), which represents over 30,000 Boeing manufacturing employees primarily located in Washington state, expired and 96% of IAM 751 members voted to initiate a strike. On October 23, 2024, 64% of IAM 751 members voted to reject our most recent offer and continue the strike. While we continue to engage in contract negotiations with IAM 751, we currently are unable to predict the duration of the strike, which began on September 13, 2024.
Translation: A lot of those workers are on strike. Though we thought we were close to getting them to come back to work after a month and a half, we failed to do so and don’t know what will happen next.
Corporatese:
As a result of the strike, production of our commercial aircraft, other than the 787 production in Charleston, and certain of our Defense, Space & Security products has halted, adversely impacting our business and financial position. This work stoppage has had and is expected to continue to have negative impacts on our key suppliers and customers. If we are unable to successfully negotiate a new contract with IAM 751 consistent with our assumptions and the strike continues for a prolonged period, our financial position, results of operations and cash flows would continue to be adversely impacted.
Translation: Those workers make pretty much all our planes. Them not being at work is costing us a lot of money, it’s costing our suppliers a lot of money, and the longer the strike goes on the more expensive all this will become for everyone in business with us. (The Anderson Economic Group consultancy estimated Monday that, at $9.7 billion of impact, the Boeing strike is the most expensive one this year — and almost as costly as the United Auto Workers strikes against the Big Three Detroit automakers last year.)
Corporatese:
Specifically, we expect further significant negative operating cash flows in this quarter and in future quarters until IAM 751 employees return to work, production resumes and deliveries ramp up. Furthermore, this work stoppage and the actions we have taken in response to the strike to help preserve our financial condition, including planned workforce reductions, furloughs, hiring freezes and pausing the issuance of certain supplier purchase orders, could negatively impact our ability to achieve our strategic objectives and to maintain our investment-grade credit rating.
Translation: We’re doing everything we can to keep the lights on, but we really don’t really have a business without them. In fact, we’re raising all this much-needed cash via stock sale because we’ve nearly maxed out the mega-corporation equivalent of a credit card.
Corporatese:
We may experience additional work stoppages in the future, which could adversely affect our business. We currently have in the U.S. 9 unions with 27 independent agreements and internationally 17 employee representative bodies, and we cannot predict how stable our union relationships will be or whether we will be able to meet the unions’ requirements. The unions may also limit our flexibility in managing our workforce and operations. Union actions at suppliers can also affect us. Current and future work stoppages and instability in our union relationships could delay the production and/or development of our products, which could strain relationships with customers and result in lower revenues.
Translation: Just a heads-up that this could happen again sometime in the future.
Unsaid in all that is that the contract voted down by IAM members last week was the third offer Boeing has put forward. The IAM is seeking a 40% wage increase and the restoration of their pension. Boeing’s first offer, the rejection of which kicked off the strike, was for a 25% wage increase. The second offer, deemed Boeing’s “best and final,” was for a 30% increase. That was also rejected. Then Boeing abandoned talks. Acting Secretary of Labor Julie Su came to town and managed to pull another offer out of Boeing, this one for a 35% increase and a pension sweetener for the IAM members who still have one. That was also rejected.
The IAM told its members Sunday that “Your Union has been in communication with the U.S. Department of Labor in an effort to spearhead getting back to the table.” Though the latest contract vote was more in Boeing’s favor than previous tallies, the union said last week that an internal survey shows that members are still not impressed with what they’re hearing for the company’s negotiators.
“While we can’t share the survey results publicly, which would give the company an unfair advantage, please know that wages and retirement security remain top priorities,” it said.
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