Boeing stock at 52-week low as planemaker lays off workers to preserve cash

After a tumultuous year, the last thing Boeing needed was a union strike.

Shares of the plane maker hit fresh 52-week lows on Friday as a labor dispute involving the largest unionized workforce – the International Association of Machinists and Aeronautical Workers (IAM) – was set to enter a second week.

“Boeing — its entire infrastructure, its entire establishment, if you will — is now under severe stress. I think they’re going to be forced to try to sort this out as quickly as they can,” Mike Boyd, president of aviation research and consulting firm Boyd Group International, told Yahoo Finance in a recent interview.

The first full week of the strike is estimated to have already cost Boeing workers and shareholders at least $571 million, according to consulting firm Anderson Economic Group.

Last week, Boeing instituted aggressive cost-cutting measures that culminated in the announcement of temporary layoffs that are expected to affect “a large number” of executives, managers and employees.

“While this is a difficult decision that affects everyone, it is in an effort to preserve our long-term future and help us get through this very difficult time,” Boeing CEO Kelly Ortberg wrote in a statement. -a memo to employees on Wednesday.

Ortberg, who took over as CEO last month, said he and his management team will also take a pay cut for the duration of the strike.

While Moody’s recently revised Boeing’s credit rating, S&P Global said its status is safe for now, provided the strike is short-lived.

“A shorter strike, on the order of weeks, would probably be manageable for Boeing and not result in a negative rating action. However, we believe a prolonged strike would be costly and difficult to absorb given the company’s already strained financial position,” S&P said in a statement this week.

Wall Street analysts anticipate the company will look to raise cash by selling shares. At the end of the second quarter, Boeing had about $58 billion in total debt and $12.6 billion in cash.

“BA may target liquidity to support debt payments over the next 18 months,” Jefferies analysts wrote in a recent note.

It remains to be seen how patient investors will be with the ongoing dispute, at a time when the company wants to increase production of the best-selling 737 Max jet to 38 a month by the end of the year, from about 25 a month in June. and July.

Morningstar equities analyst Nicolas Owens wrote in a recent note that Boeing’s relationship with its auto union has been “contentious” for decades and that the strike is expected to last until the end of the year.

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The analyst cut his price target for the stock to $216 per share from $219 to reflect the loss of productivity in the fourth quarter of 2024 and slower production growth in subsequent periods.

“(Boeing has) a lot of pressure to get their assembly line in good shape,” Owens told Yahoo Finance on Monday. “And the strike is interfering with that and delaying any progress they were making in actually recertifying the assembly process for airplanes like the 737.”

IAM members went on strike last Friday after rejecting a contract offer from Boeing. The incident is a test of the company’s new management and recovery from a string of injuries this year.

In early January, the fuselage of a 737 Max 9 opened during an Alaska Airlines (ALK) flight, triggering a series of regulatory investigations, a production overhaul and a CEO replacement.

Last month, Ortberg, an aerospace industry veteran and Boeing outsider, took over the company’s top job.

At a Morgan Stanley conference recently, CFO Brian West noted “good momentum” ahead of the strike, with “production increasing while at the same time incorporating significant improvements” in the manufacturer’s quality and production system.

The union and Boeing met with a mediator on Tuesday and Wednesday to facilitate talks.

Boeing is “ready to do a deal,” a source close to the negotiations told Yahoo Finance earlier this week.

But after two days of mediation, the two sides seemed distant.

“Throughout the day, we relayed to the company through the mediator the priorities of our members. Unfortunately, the mediation ended today without reaching any resolution,” read an update on the IAM website.

The update said no additional dates are scheduled for the talks.

Boeing shares are down more than 35% year to date. The company is expected to report quarterly results next month.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow X at @ines_ferre.

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