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Although the productive hit from Boeing’s (BA+2.76%) machinists being on strike remains clear, there is another complication lying in wait for the company.
CFO Brian West told an industry conference that the planemaker’s financial situation is “very complex” — and for good reason.
“From a financial perspective, any impact is going to be dictated by the duration of the work stoppage, which I won’t address today,” he told attendees at Morgan Stanley’s (MS-0.68%) Laguna Conference on Friday. “But a strike will impact production and deliveries and operations and will jeopardize our recovery. So, our immediate focus is to be laser-like focused on actions to conserve cash and we will. So, we’ve got a very complex situation that we’re solving.”
Before a door plug blowout on a 737 Max 9 invited hordes of scrutiny and a Federal Aviation Administration production cap earlier this year, Boeing had been plotting a comeback run following the last 737 Max mess that diminished its capacities. Faltering steps along that path have led to credit rating downgrades that threaten to put Boeing in junk-bond territory, which would make it much harder to raise operational funds like the $10 billion it borrowed earlier this year.
Boeing is a very big company with very big expenses. Against $77.8 billion in revenue last year, according to its annual report, it spent $70.1 billion on the materials to build planes and the people who do that building — including the machinists. They’re holding out in hopes that a union contract on the table with 25% raises turns into one with pay bumps closer to the 40% that they had been seeking.
“We’ve got two objectives,” West said at the conference. “First of all, we want to prioritize the investment-grade credit rating, and secondly, we’re going to allow the factory and the supply chain to stabilize. Now, that last objective just got harder based on last night.”