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Boeing is currently facing a challenging financial situation as it reported a massive $6 billion loss in its quarterly earnings. This significant loss has put the company in a difficult position, especially as it awaits a crucial union vote later in the day.
The aerospace giant disclosed its third-quarter earnings on Wednesday morning, painting a grim picture for the company. The $6.17 billion net loss brings Boeing’s total losses for the year to nearly $8 billion. Operating cash flow took a hit, with a negative balance of $1.345 billion. Revenue decreased by around 1% compared to the same period last year, with the company reporting approximately $17.8 billion in total revenue. These figures were in line with the preliminary results released last week.
Boeing attributed its operating cash flow issues to “unfavorable working capital timing, including the impact of the IAM work stoppage, as well as lower commercial widebody deliveries.” This marks a stark contrast from the $22 million operating cash flow reported a year ago.
In a message to employees addressing the results, new CEO Kelly Ortberg acknowledged the challenges ahead, stating, “This is a substantial vessel that will require some time to reverse course; however, when it does, it has the potential to be exceptional once more.”
Last week, Boeing announced plans to halt production of its 767 cargo jet and delay the release of its anticipated 777X widebody jet. Additionally, the company revealed it would incur $5 billion in pre-tax charges, with $3 billion attributed to the commercial airlines division and $2 billion to the defense business.
To alleviate its financial burden, Boeing secured a $10 billion financing agreement from a group of banks and filed a mixed shelf registration with the SEC to potentially issue up to $25 billion in new debt securities, common stock, preferred stock, and other offerings. Reports indicate that Boeing intends to move forward with a $10 billion stock offering through the registration.
By the end of the quarter, Boeing had $10.5 billion in cash and securities and a backlogged order book valued at $511 billion, encompassing more than 5,400 commercial airplanes.
The ongoing labor dispute with its primary union, representing 30,000 employees, has prompted Boeing to enact a new credit agreement along with debt and stock offerings. In an effort to bolster its financial stability, Ortberg announced plans to reduce the workforce by 10%, affecting approximately 17,000 employees across all divisions.
These workforce reductions are expected to begin as soon as next month, aligning with the anticipated resolution of Boeing’s labor disagreement with the International Association of Machinists (IAM). Employees are set to vote on a new contract proposal later in the day.
The strike prompted by the labor dispute has resulted in significant costs for both Boeing and its employees, with estimates suggesting the total expenses could reach $5 billion.
“The termination of the IAM strike is top priority for us all today,” Ortberg emphasized. “We have been diligently working on finding a solution that benefits both the company and our employees.”
He added, “We need to reassess our priorities and create a more streamlined, efficient organization to navigate these challenges effectively.”
In light of these developments, Boeing is at a critical juncture, with both financial and labor issues looming large. The outcome of the union vote will be pivotal in determining the company’s path forward and its ability to weather the storm ahead. Only time will tell how Boeing navigates these turbulent waters and emerges stronger on the other side.
