~This is just a little write up about the ongoing strike. My Boeing deep dive write up will go into a lot more detail about the company~
Recent News:
Union Strike Development: On October 23, 2024, 64% of the 33,000 union members rejected Boeing’s latest contract proposal, extending the strike into its sixth week.
Layoffs: 10% workforce reduction ongoing, and suppliers are also beginning layoffs.
Production Delays: Persistent across multiple aircraft lines, impacting delivery timelines.
Credit Downgrade Risk: Looms due to prolonged strike and financial strain.
Credit and Share Offerings: Boeing secured a $10 billion credit line and is preparing to raise up to $25 billion via stock and debt.
Customer Relations: While Emirates and United Airlines support Boeing, American Airlines’ CEO is actively voicing frustration.
Emerging Competitors: Comac and Embraer gaining traction? No not exactly
Embraer is years away as they don't have a plane built for competition yet
Comac is China, I'd imagine they have a tough time getting regulations, trust, partners, etc.
Yes companies will place speculative orders but don't expect that big push that many people are hoping for in spite of Boeing.
No the U.S. government would not let Comac take over Boeings role and risk national security
Manufacturing Issues: Unresolved, contributing to further customer dissatisfaction and operational delays.
Boeing Explores Sale of NASA Business
CEO Kelly Ortberg is actively seeking buyers for Boeing’s Starliner and other space projects as the company navigates ongoing financial difficulties.
SpaceX has emerged as the leading partner for NASA, surpassing Boeing in terms of contracts and collaborations.
Despite facing numerous challenges, Boeing retains its involvement in the Space Launch System.
United Launch Alliance is also looking for potential buyers for its rocket-launch ventures.
Boeing’s space and defense unit reported a significant loss of $3.1 billion.
Blue Origin had previously engaged in discussions with Boeing regarding NASA programs.
The Starliner remains uncertified, resulting in delays for astronaut missions, now projected to occur after 2025.
Shoutout @TheRayMyers for the graphic
Union Tensions:
Union members unhappy with Stephanie Pope and Brian West with their positions under scrutiny.
Union growing frustrated with poor Union leadership
Union demands include pensions, 40% wage hikes, and board representation
Really seems like the workers want that 40% the most
Union benefits have been reduced to $250 per week since 10/1.
Long time to go with no pay or benefits (Many have got part time jobs for now)
The strike is costing Boeing an estimated $50 million per day, or around $1.5 billion per month.
Typical strike duration for Boeing strikes last around two months
CEO Kelly Ortberg’s Commentary
"It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic company and aerospace leader once again."
Ortberg emphasized that top executives must be on the production floor and involved in every step of the process. "I want our leadership working hand-in-hand with our employees, showing that we are committed at every level"
"We will focus on 'doing less and doing it better' by prioritizing value-added activities. Top executives must be on the production floor to demonstrate commitment."
What to Watch For:
Additional layoffs may occur if no agreement is reached.
When deal is reached, Machinists will probably get hit with some layoffs
The risk of credit downgrading and the need to avoid a massive stock sale to prevent further financial decline.
Holiday season = Possibly having less active talks between Union and Boeing
Possible government intervention or bailout if the strike prolongs.
Activist investors may step in if the stock reaches the $120-$150 range.
C-suite changes are likely if tensions continue without resolution.
Sale of under performing sectors
Space Unit is expendable - SpaceX took over and Boeing won't catch up
Next offer should be 40% GWI (maybe even 45%), more money up front rather than spread out over the years - 100% won’t get board seat or pension back so going to have to bump up that GWI
Sentiment:
Boeing faces significant FUD as the strike extends and the terrible year continues. Talks of Boeing going completely under, "BA to 0" ... Silly to me
Couple Key Facts:
Boeing takes 10-12% of United States Defense Budget ($38b to $46b)
Around 45% of commercial aircraft in the United States are Boeing
Despite announcing bad earnings and operational struggles, any resolution or positive news could trigger a stock rally. Been a year of bad news, who noticed recently the switch in reaction to bad headlines? Blown tires were making the stock sell off earlier this year, things that weren’t even Boeings problems would put Boeing in a bad light. All about the sentiment. Quickly the famous "if its not Boeing, I'm not going" became "if its Boeing, I'm not going" People lost trust in the company and now Boeing needs to regain it the hard way.
Union strike / production delays / FAA overview / court cases / layoffs / terrible earnings / credit downgrade threats / tapped credit / offering / supply chain delays / quality mishaps / leaving people in space etc. There's not much else that can be said that can drive price down. Terrible year and deservingly so.
All of that and 140-150 is still holding, down 40% ytd. We get the union deal and we can pop on the first good news all year it seems. Boeing does not need to rush to resume full-speed production. Taking a cautious approach and ensuring quality is essential, don't need a repeat of old management greedy decisions. Also another major incident could make recovery difficult or even impossible. The focus should be on long-term stability rather than short-term gains. Focus on the backlog, Airbus has been going through some pains of their own so they aren't running away with the market.
So where too? Union strikes a deal and we try to flip the 175 spot for big trend change. Nothing else matters until this deal is inked, once it is next step is execution. They need 3 good solid months of producing 35+ planes with no issues or hiccups. Ortberg seems to know what he's doing, he was a great CEO at Collins, the industry loves him and believes in him. If Boeing c suite can let him do his job, he can turn this company around and regain America's trust. Air Travel only getting more and more popular, demand for new aircraft continuing to rise, if Boeing can avoid anymore major setbacks the future can be bright but long long ways to go. Step one is pay the workers.
Kelly Ortberg’s approach focuses on cutting non-core business areas, streamlining operations, and emphasizing Boeing’s core strengths in commercial and defense aerospace. His decisive actions like the layoffs and restructuring, aim to boost efficiency and restore credibility, contrasting with previous management from Dave Calhoun Investors may find optimism if these changes lead to improved production and financial stability. Future success will depend on hitting key production targets, maintaining quality, and building the next plane to stay competitive. Move back towards Seattle and regain the heart and pride of Boeing and watch the production ramp up. There's no one that can scale up production like Boeing can. Maybe they take this step back and can refocus on advancing on the automation front to eventually help speed up production and ensure there's no human error involved.
A few things I'm watching for:
Union Agreement: Resolving labor disputes to stabilize production operations and essentially start the engine of the company back up.
C-Suite Overhaul: Refreshing leadership, drain the swamp of toxic people that employee's dislike like Pope. Her and West are cut from the GE fabric that Calhoun came from. That culture is what got Boeing into all of this trouble from years ago.
Relocating Headquarters: Moving back to Seattle to reconnect with its engineering roots and core talent. Ortberg lives in Seattle now, it makes too much sense.
Next-Generation Aircraft: Developing a new model to stay competitive and address future market needs. Should be exciting and needs to be designed within next couple years.
Production Focus: Ensuring an efficient and reliable production strategy to restore trust and meet delivery schedules. Doing the basics and making strong stable planes.
