Boeing Needs Some Help to Stem Its Cash Burn and Losses

It’s almost always bad news when a statement from a prominent company hits late on Friday. For those who missed Boeing Co.’s release at 4:30 p.m. New York Time ahead of a three-day weekend for the bond market, Boeing laid out the ugly truth of blowout operating losses at its commercial aircraft and defense businesses during the third quarter, which combined for about $6.4 billion.

Stock traders pounced on the news, and Boeing’s shares fell about 2% in a matter of minutes. The cooler heads that know Boeing is too important to fail quickly prevailed, and shares rebounded to its previous close in just a few hours. Regardless, Boeing is in dire financial straits that will trickle down to suppliers with more aircraft delays, compounded by the monthlong strike of 33,000 machinists in the Seattle area. The company announced it will slash 10% of the workforce to help mitigate the financial situation, but that will be just a stopgap. Longer term, broad moves will be needed, such as exiting the space business. But the more immediate need is to end the strike and return to producing high-quality aircraft, and Boeing needs a little financial breathing room for that. Certainly, the Defense Department could ease some of Boeing’s pain by renegotiating fixed-price contracts that are strangling the company.

Boeing’s cash burn is alarming because the company only has liquidity of $10.5 billion, and losses will accelerate as the labor strife drags on. Boeing would be facing a financial cliff if one of the main credit rating companies — S&P Global Ratings, Moody’s Ratings and Fitch Ratings — decides to cut Boeing to junk, driving up its borrowing costs and making a turnaround that much more difficult. Still, equity investors seem poised to help with a sale of new shares.

Boeing said in the news release that the overall third-quarter cash-flow loss was $1.3 billion, mitigated by the profitable global services unit, and the unadjusted earnings per share loss was $9.97, or a net loss of about $6 billion. The net loss includes $5 billion of charges the company announced, with $2 billion at defense and space programs and $3 billion for adjustments to the 777 and 767 aircraft programs. That excludes the 787, which is being assembled at a nonunion factory in North Carolina, and the 737, the company’s biggest cash earner that’s shut down by the strike.

cashed out