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Market Analysis
Boeing Strike Continues as Firm Withdraws “Final and Best Offer”
Boeing faces escalating challenges as a prolonged workers' strike, potential credit downgrade, and financial pressures threaten its production targets and stock performance.
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Boeing Co. (NYSE: BA) is grappling with a perfect storm of labor disputes, financial strain, and potential credit downgrades as it enters the fourth week of a strike by 33,000 U.S. factory workers.
The aerospace giant has withdrawn its latest pay offer to the union, citing “non-negotiable” demands, while simultaneously facing the prospect of a junk credit rating from S&P Global Ratings. These developments have sent Boeing’s stock tumbling in premarket trading today.
Labor Dispute Intensifies as Boeing Withdraws “Best and Final” Offer
The strike, which began on September 13, 2024, has paralyzed production of Boeing’s key aircraft models, including the 737 MAX, 767, and 777. Negotiations between the company and union representatives collapsed after the latest round of talks with federal mediators.
Boeing’s “best and final” offer, which included a 30% raise and the restoration of a performance bonus, was rejected by the union as insufficient.
Boeing has responded by withdrawing its offer entirely, stating that further negotiations “do not make sense at this point.” The company claims the union did not seriously consider its proposals, while union members argue that the offer fell short of their expectations based on internal surveys.
Strike Costing Boeing Approximately $1 Billion per Month
As the strike continues, Boeing’s financial outlook is deteriorating. S&P Global Ratings is considering downgrading the company’s credit rating to junk status, citing concerns about cash burn and debt obligations.
The credit agency estimates that Boeing will deplete about $10 billion in cash during 2024 and may require additional funding to meet day-to-day operations and finance upcoming debt maturities.
The ongoing labor dispute is reportedly costing Boeing more than $1 billion per month, exacerbating financial pressures that have persisted since the 737 MAX crashes in 2018 and 2019. The company has posted annual losses since 2019 and faces significant debt obligations, with $4 billion due in 2025 and $8 billion in 2026.
Boeing Stock Slides in Premarket
Boeing’s stock has reflected these challenges, with shares down 1.36% in pre-market trading on October 9, 2024, at $152.55.
The company has lost 5% of its market value since the strike began and is exploring options to raise billions through stock and equity-like securities sales. Year-to-date, Boeing’s stock has plummeted 40.67%, significantly underperforming the S&P 500’s 20.57% gain.
Analysts maintain an average price target of $207.00 for Boeing, but the company faces an uphill battle to regain investor confidence. S&P does not expect Boeing to reach its target of producing 38 737 MAX jets per month until mid-2025, further complicating the company’s recovery efforts.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
