“It’s all getting a bit hand to mouth,” said Nick Cunningham, an analyst at Agency Partners LLP in London.
Besides the defense and space charges, Boeing will book additional costs for pushing back its 777X model once more, leaving its largest widebody aircraft with a delay of about six years.
As CEO, Ortberg has appealed to a sense of camaraderie and shared destiny with the workforce.
On the one hand, Ortberg wants to instill a sense of urgency and shared sacrifice, said George Ferguson, an analyst with Bloomberg Intelligence.
If there was a honeymoon for the CEO, it seems to be over.” –With assistance from Siddharth Philip and Danny Lee.
Nick Cunningham, an analyst at Agency Partners LLP in London, said, “It’s all getting a bit hand to mouth.”. It is simply another quarter of big charges that the previous management would have had to make anyhow because they represent ongoing and emerging issues rather than being a part of a restructuring in the traditional sense. As such, it is not a coherent plan. “.
Rating agencies have warned that Boeing could deviate from investment grade, which would make the aircraft manufacturer the largest “fallen angel” in US corporate history. Add to that the $10 billion in cash and short-term securities the company needs to keep from going into junk status, and that leaves it with very little cushion. Due to the strike’s cost, it is more important than ever to access markets as soon as possible to secure new funding.
Indefinite Loop.
“More issues arise when a problem is resolved that was brought to a head,” Bank of America analyst Ron Epstein stated in a letter to clients. The problems worsen the effects of one another and feed off one another, producing a never-ending downward spiral. “.
Upon formally reporting third-quarter earnings on Friday evening, Boeing announced in an unexpected manner that it will record $5 billion in combined charges for its two largest businesses. Boeing will record extra expenses in addition to the defense and space fees for delaying its 777X model once more, which will result in a six-year delay for its largest widebody aircraft.
About Boeing’s turnaround initiatives, a lot is unclear. The recent strike undercut the production ramp-up that was intended to improve cash flow, and the defense and space industries are still losing money.
Spirit AeroSystems Holdings Inc. needs to be bought back by the company still. which it had foolishly split off nearly two decades prior, only to witness a decline in manufacturing quality at its main supplier as a result.
Over an extended period, Boeing might have to make some difficult decisions regarding unprofitable areas, such as its space projects. A few weeks ago, the division made headlines throughout the world when its Starliner capsule returned to Earth without any people on board. After NASA decided not to risk re-entering the spacecraft with two astronauts, it was an embarrassing end to the agency’s first crewed mission to orbit.
Despite reaching out to customers, regulators, Pentagon officials, and touring Boeing factories, Ortberg has not given interviews to the media since taking over. Having been trained as an engineer, Ortberg worked for the majority of his career at Collins Aerospace, a reputable manufacturer of avionics equipment and a major supplier to Boeing.
In his role as CEO, Ortberg has tapped into the workforce’s sense of unity and common destiny. He made a point of moving from West Palm Beach, Florida, to Seattle, a move that distinguished him from his predecessor, who managed the company primarily from the opposite side of the country.
Money Pit.
In reference to a 2014 contract that cost them their pensions, the CEO asked employees to embrace the future and not harbor grudges when the strike began in mid-September. Following Ortberg’s announcement of furloughs to conserve cash, senior management took solidarity pay reductions; he added that executives and management will also be affected by the most recent job cuts.
However, some observers question why Boeing isn’t acting more quickly to put an end to the work stoppage that is worsening its financial difficulties, given that so-called touch labor makes up less than 5% of the total cost of a commercial aircraft program.
According to RBC Capital Markets analyst Ken Herbert, “it’s not a needle mover in terms of Boeing profitability.”. As time passes, the disruption and financial burden increase. The question is, what are we waiting for? “.
Boeing’s supply chain is being negatively impacted by the strike, increasing the likelihood that even after workers return to their jobs, the company’s own factories will see a sluggish or nonexistent recovery. Additionally, Boeing has not yet disclosed the location of the workforce reductions or the potential severance costs to the business.
“Unable to Win”.
Another risky tactic is to announce the job cuts in the midst of labor negotiations.
On the one hand, according to Bloomberg Intelligence analyst George Ferguson, Ortberg hopes to inculcate a sense of urgency and mutual sacrifice. On the other hand, at a time when competent mechanics are in great demand, the action runs the risk of further enraging the very employees Boeing needs to resume jetliner production.
The verbal brawl had heated up even before Friday’s announcement. Boeing and the union both lodged formal complaints, alleging the other had violated labor negotiation protocol.
Ferguson said of Ortberg, “He can’t win without the union.”. When they return to the floor, “He needs their heart and soul.”. It appears that the CEO’s honeymoon is over, if there was one. “.
–With aid from Danny Lee and Siddharth Philip.
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