The ongoing crisis at Boeing Co. (BA) has taken a significant turn as negotiations to end a month-long strike have failed and S&P Global Ratings has threatened to downgrade the company’s credit rating to junk status. The deadlock between Boeing and the International Association of Machinists and Aerospace Workers has led to a standstill, with both parties blaming each other for the impasse.
Boeing highlighted the urgent need to resolve the strike, which has halted production at its main commercial manufacturing base on the US west coast and is costing the company an estimated $10 billion in cash burn this year. Despite offering a 30% wage increase and enhanced retirement benefits in a proposal two weeks ago, the company stated that the union’s demands were non-negotiable and excessive.
The stalemate over pay and pensions has persisted since the union’s 33,000 members went on strike on September 13. The financial toll on Boeing has been substantial, with estimated daily revenue losses of $100 million. To address its dwindling cash reserves and increasing debt, Boeing is considering selling at least $10 billion in new stock to mitigate the financial impact of the work stoppage.
In addition to potential credit rating downgrades, Boeing faces looming debt maturities, with $4 billion due in 2025 and $8 billion in 2026. Moody’s Ratings is weighing the possibility of downgrading Boeing to junk status, which would result in higher borrowing costs for the company. To preserve its investment-grade credit rating, Boeing has initiated cost-saving measures such as furloughs, pay freezes, and travel bans.
Efforts to reach a resolution have been complicated by missteps from both sides, including Boeing’s direct offer to workers without consulting union leaders and the IAM’s rejection of the company’s initial wage increase proposal. The breakdown in talks after weeks of negotiations signals the challenges ahead in resolving the strike and restoring operations at Boeing’s commercial manufacturing facilities.
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