If you own Boeing (NYSE: BA) stock, you've probably been glued to news of the protracted labor strike by Boeing's machinists union, now entering its fifth week.
And you've probably already heard the latest bad news: After two days of renewed talks with union negotiators from the International Association of Machinists (IAM) -- talks that apparently went absolutely nowhere -- Boeing cut off negotiations entirely, withdrew its "best and final" offer of a 30% pay raise (spread over four years), and walked away. As Boeing Commercial Aircraft CEO Stephanie Pope explained, "The union made non-negotiable demands far in excess of what can be accepted if we are to remain competitive as a business."
In response, IAM complained Boeing "refused to improve wages, retirement plans and vacation or sick leave," according to a report by CNBC. On Thursday, Boeing filed an "unfair labor practices" complaint with the National Labor Relations Board, accusing IAM of engaging in not negotiating in good faith.
Now, presumably, this story doesn't end here. At some point, Boeing must return to the table. It simply cannot afford to leave its 737, 767, and 777 production lines shut down indefinitely.
Depending on whom you ask, Boeing is losing anywhere from $1 billion per week (says The Washington Post) to $1 billion per month (says CNBC) as this strike drags on. Prior guesses have ranged as high as $100 million to $150 million per day (which works out to $3 billion to $4.5 billion per month).
Which guess is right? We'll probably not know until Boeing reports its Q3 earnings (which should include results for the first two weeks of the strike). Meanwhile, it's in the union's interests to make Boeing's losses sound as big as possible, to increase pressure on management to agree to its pay hike and pension demands. Conversely, it's in Boeing's interest to make the losses seem as small as believable, to convince workers that it is perfectly content to wait them out.
So whichever estimates you hear, make sure to take them with a few grains of salt.
That said, here's what we know for sure: According to data from S&P Global Market Intelligence, Boeing lost $1.8 billion through the first half of this year. It's actually been losing money for the past six straight years -- since even before the pandemic. Plus, Boeing has nearly $58 billion in debt on its balance sheet, and interest and principal on those debts must be paid whether or not Boeing's building airplanes as the strike stretches on.
So however much the strike is costing Boeing, it's adding to the financial strain this company was under well before the strike began. In what appears to be a first, one local Seattle network -- NBC's King 5 affiliate -- suggested on Thursday that this strike could even end in a bankruptcy filing for Boeing.
Admittedly, that's a worst-case scenario. Asked about the potential for a bankruptcy filing, though, a Boeing spokesperson merely declined to comment -- which doesn't exactly inspire confidence.
Still, it's worth pointing out: Even if this strike lasts five, six, seven weeks, or more, Boeing has options.
For example, in a note released Wednesday, investment bank Wells Fargo predicted Boeing will try to sell stock to raise $10 billion to $15 billion to replace money lost to the strike. The company might also simply take out loans to cover its cash needs.
Granted, that wouldn't be great for Boeing's credit rating, adding more debt on top of a near-$60 billion debt load already. That's probably one reason S&P put Boeing on notice for a potential downgrade to its credit rating Thursday. Boeing's current rating is "BBB-," which sounds bad, but is still considered investment grade. Now the ratings agency is contemplating cutting Boeing's credit rating to BB -- which sounds better, but is in fact a junk bond rating.
But it's still an option.
It's also worth remembering that in the much direr straits Boeing faced during the pandemic, when demand for airplanes nearly dried up worldwide, Boeing did both these things. The company took out tens of billions of dollars in loans. And Boeing issued a lot of new stock. In 2020 alone, Boeing issued 20 million shares, and it's issued 33 million more in the years since as it continued losing money.
All of which is to say, it's not ideal that Boeing might need to raise a lot of cash, and sell a lot of stock, to survive this strike -- but it's done this before, and it can do it again if it needs to. So ultimately, I don't believe the stock is a bankruptcy risk at this point.
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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.