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While the company is stuck waiting for the machinists’ strike to end, Boeing Co. (BA-0.71%) just announced on Monday that it will raise $19 billion in an initial public offering. And the prospectus for the stock sale spells out exactly how severely the shutdown is impacting the company’s vision for the future.
Boeing wants to raise $19 billion as it faces delivery delays and employees stopped working
When a company sells stock to the public, it must inform the public of the risks inherent in its investment. The biggest problem facing Boeing right now is that workers won’t be returning to assembly lines anytime soon. In Boeing’s Form 424B5, the filing with the Securities and Exchange Commission to which the prospectus pertains, the aircraft maker faces the biggest headache in the section headed “Risks Associated with Our Business and Operations.”
“Some of our employees and those of our suppliers are represented by labor unions,” the company said. “Any work stoppages by our employees are currently having an adverse effect on our business, financial condition, results of operations and/or cash flows.Future work stoppages by our employees or those of our suppliers are also negatively impacting our business. It may have a negative impact.”
That may be putting it lightly, but on the corporate side, Boeing is gradually revealing its multilayered stress.
Company name:
Approximately 57,000 employees, representing 33% of our total workforce, are represented by unions as of December 31, 2023 under collective bargaining agreements of varying terms and expirations.
Translation: We have a lot of union members.
Company name:
On September 12, 2024, the contract with International Association of Machinists and Aerospace Workers District 751 (“IAM 751”), which represents more than 30,000 Boeing manufacturing employees primarily located in Washington state, expires and IAM 751 96% of members voted to start the contract. strike. On October 23, 2024, 64% of IAM 751 members rejected the latest proposal and voted to continue the strike. Although we continue to negotiate a contract with IAM 751, we are unable to predict the duration of the strike, which began on September 13, 2024, at this time.
Translation: Many of these workers are on strike. We thought we would be able to get them back to work after a month and a half, but that failed and we don’t know what will happen next.
Company name:
As a result of the strike, production of our commercial aircraft and certain defense, space and security products, except for the 787, which is produced in Charleston, has been halted and our business and financial condition has been adversely affected. This business interruption has adversely affected, and is expected to continue to adversely affect, our key suppliers and customers. If we are not successful in negotiating a new contract with IAM 751 in accordance with our expectations and the strike continues for an extended period of time, our financial condition, results of operations and cash flows may continue to be adversely affected.
Translation: These workers build almost all airplanes. Their not working is costing us and our suppliers dearly, and the longer the strike goes on, the more expensive all these costs will be for everyone doing business with us. It will be. (Consulting firm Anderson Economic Group on Monday estimated the impact of the Boeing strike at $9.7 billion, making it the costliest strike of the year and more expensive than last year’s strike by the United Auto Workers against three major Detroit automakers.) (I estimated it to be almost expensive.)
Company name:
Specifically, we expect to experience significantly more negative operating cash flow in the current quarter and in future quarters until IAM 751 employees return to work, production resumes, and deliveries increase. Additionally, this work stoppage and the actions we have taken in response to the strike to maintain our financial position, including planned layoffs, furloughs, hiring freezes, and a suspension of the issuance of purchase orders for certain suppliers. may adversely affect our ability to achieve our goals. To achieve our strategic goals and maintain our investment grade credit rating.
Translation: We do everything we can to keep the lights on, but the truth is we can’t do business without them. In fact, we’ve nearly exhausted the large corporate equivalent of a credit card, so we’re raising all this much-needed cash through stock sales.
Company name:
Further business interruptions may occur in the future, which could adversely affect our business. Currently, there are nine labor unions in the United States with 27 independent agreements and 17 employee representative organizations internationally, but it remains to be seen how stable union relations will be and how union demands will be addressed. It is impossible to predict whether it will be fulfilled. Labor unions could also limit our flexibility in managing our employees and operations. The actions of our supplier unions may also affect us. Current and future business stoppages or instability in union relations could delay product production or development, strain relationships with customers, and result in decreased revenues.
Translation: Be aware that something like this could happen again in the future.
What’s less talked about is that the deal, which was rejected by IAM members last week, was Boeing’s third proposal. IAM is calling for a 40% wage increase and pension restoration. Boeing’s first offer, whose rejection sparked a strike, was for a 25% wage increase. Boeing’s second proposal, considered its “best and final,” was for a 30% increase. That too was rejected. Boeing subsequently abandoned negotiations. Acting Labor Secretary Julie Su came to Japan and succeeded in extracting another offer from Boeing. This is a 35% increase and pension relief for IAM members who still have a pension. That too was rejected.
“Your union has been in contact with the U.S. Department of Labor to take the lead in returning to the bargaining table,” IAM told its members on Sunday. Although the latest contract documents are more favorable to Boeing than previous tallies, the union found in an internal survey last week that its members remain unimpressed with what they are hearing from the company’s negotiators. It was announced that it was shown.
“While we are unable to make the results of our investigation public, which would give the company an unfair advantage, we want you to know that wages and retirement security remain our top priorities,” the company said. said.
