Boeing Co.’s BA credit rating has been placed under negative watch by S&P Global Ratings due to the ongoing strike by the company’s machinist union, which has entered its fourth week.
What Happened: The rating agency placed Boeing’s “BBB” issuer credit rating and senior unsecured debt ratings on CreditWatch with negative implications on Tuesday.
The strike is expected to result in a cash outflow of approximately $10 billion in 2024, partly due to working capital buildup for a manufacturing process overhaul and strike-related costs.
Boeing’s recovery is at risk as the strike continues, delaying the company’s goal of increasing Max production to 38 planes a month by the end of 2024. The strike is estimated to cost the company over $1 billion per month, even after implementing cost-saving measures.
The strike is also expected to add to Boeing’s cash usage this year, with the company estimated to use about $10 billion in 2024 if the strike continues through the fourth quarter.
Why It Matters: The strike is the latest in a series of challenges for Boeing. The company has been contemplating raising at least $10 billion by issuing new stock to replenish its cash reserves.
Boeing has also faced safety issues, with the U.S. Federal Aviation Administration warning operators of Boeing 737 airplanes that the rudder system could jam due to a faulty part. The National Transportation Safety Board (NTSB) previously criticized the FAA for downplaying the issue’s urgency.
Boeing’s decision to cut health care benefits for 33,000 workers during the ongoing strike has also been met with strong opposition from union officials, who see it as the latest in a series of missteps during the labor dispute.
Price Action: Boeing closed at $154.65 on Tuesday, down 0.81% for the day. In pre-market trading, the stock fell an additional 1.31% to $152.63. Year to date, Boeing has dropped 38.57%, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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