After a tumultuous year, the last thing Boeing needed was a union strike.
Shares in the aircraft manufacturer hit a 52-week low on Friday as a labor dispute involving the company’s largest union, the International Association of Machinists and Aerospace Workers (IAM), entered its second week.
“Boeing’s entire infrastructure, their entire establishment, is under severe stress right now. They’re going to be forced to solve this problem as quickly as possible,” Mike Boyd, president of aviation research and consulting firm Boyd Group International, told Yahoo Finance in a recent interview.
The first week of the strike has already cost Boeing workers and shareholders at least $571 million, according to consulting firm Anderson Economic Group.
Last week, Boeing rolled out aggressive cost-cutting measures and announced layoffs that are expected to ultimately affect a “large number” of executives, managers and employees.
“This is a tough decision that affects everyone, but it is part of our efforts to protect our long-term future and navigate these extremely challenging times,” Boeing CEO Kelly Ortberg wrote in a memo to employees on Wednesday.
Ortberg, who took over as CEO last month, said he and his management team would take pay cuts for the duration of the strike.
Boeing wing maintenance leader Lee Lara, a 16-year veteran of the company, shouts during a strike after union members voted to reject a contract proposal, Sunday, Sept. 15, 2024, near the company’s factory in Everett, Washington. (AP Photo/Lindsay Wasson) (The Associated Press)
Moody’s recently said it was reviewing Boeing’s credit rating, while S&P Global said Boeing’s ratings are safe for now if the strike is short-lived.
“A short-term strike of several weeks would be manageable for Boeing and would not lead to a downgrade of our ratings. However, we believe a prolonged strike would be costly and difficult to absorb given the company’s already challenging financial position,” S&P said in a statement this week.
Wall Street analysts expect the company to seek to raise capital through stock sales. Boeing ended the second quarter with about $58 billion in total debt and $12.6 billion in cash.
“BA may target liquidity protection to support debt repayments over the next 18 months,” Jefferies analysts wrote in a recent note.
The company is aiming to increase production of its best-selling 737 Max jet to 38 per month by the end of the year from about 25 per month in June and July, but it remains to be seen how patient investors will be with the ongoing dispute.
Morningstar stock analyst Nicholas Owens said in a recent note that Boeing’s relationship with its machinists union has been “conflicted” for decades and he expects the strike could continue through the holiday period through the end of the year.
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The analyst lowered the company’s price target to $216 from $219 per share, reflecting lower productivity in the fourth quarter of 2024 and slower production growth in the period after that.
“[Boeing has] “There’s a lot of pressure on them to get the assembly lines back up and running,” Owens told Yahoo Finance on Monday, “and the strike is impeding that and slowing progress toward recertifying assembly operations for airplanes like the 737.”
IAM members went on strike last Friday after rejecting a contract offer from Boeing, in a move that will be a test of the company’s new management and its recovery from a series of accidents this year.
In early January, the fuselage of a 737 Max 9 jet ruptured during an Alaska Airlines (ALK) flight, triggering a series of regulatory investigations, a production overhaul, and a CEO change.
Last month, Ortberg, an aerospace industry veteran and outsider to Boeing, became the company’s chief executive.
Chief Financial Officer Brian West recently said at a Morgan Stanley conference that the company’s “momentum is good” before the strike and that the company is “incorporating significant improvements in the quality and production systems of our manufacturers as we scale up production.”
The union and Boeing met with a mediator on Tuesday and Wednesday to try to facilitate the talks.
Boeing is “prepared to close a deal,” a source close to the negotiations told Yahoo Finance earlier this week.
But after two full days of mediation, the two sides appeared to be far apart.
“Throughout the day, we have been communicating our members’ priorities to the company through the mediator. Unfortunately, mediation concluded today without any resolution,” an update on the IAM’s website said.
The latest update is that no further talks have been scheduled.
Boeing shares have fallen more than 35% since the beginning of the year. The company is scheduled to report quarterly earnings next month.
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Inés Ferré is a senior business reporter at Yahoo Finance. Follow her on X. Follow.
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