The Boeing strike is costing the troubled plane maker tens of millions of dollars every day
Although Boeing (BA) is still trying and failing to get its striking machinists back on the job, it has a few other corporate fires to put out. One crisis made worse by the work stoppage is the company’s dwindling supply of cash.
Bank of America (BAC) analyst Ron Epstein told Quartz on Wednesday that Boeing is losing $50 million a day of cash through lost revenue and continuing costs. That might not sound like much to a company whose latest quarterly earnings report said it has a $12.6 billion cash position. But when that same company had a $4.3 billion quarterly cash outflow before it lost its main source income, the situation becomes trickier to navigate.
“If the strike goes beyond a certain point — I wish I could tell you, maybe a month? — the risk increases,” Epstein said. “If you get beyond a month, things get more disruptive.”
Fortune recently reported that, without its workers, the plane-maker has stopped production on its 737 MAX, 767, and 777/777X commercial aircraft models. Among them, that’s 87% of Boeing’s current jetliner delivery backlog.
A surprising intransigence
Epstein said he’s surprised negotiations have become so tense between Boeing and the International Association of Machinists and Aerospace Workers (IAM). He said his team had been penciling in the 40% wage increase the IAM had been asking for, figuring they’d get it in short order. The union voted down a contract offer with a 25% bump, meaning things are less certain.
The growing strain in talks — with updates such as Boeing instituting furloughs, the plane-maker tossing out a “best and final offer” of a 30% increase, and the union calling that offer “a blatant show of disrespect” — suggests both sides may have a harder time reaching an agreement than originally expected.
Like others in the industry, Epstein noted the union’s ask would make for more than $1 billion a year in extra costs, an amount that might otherwise be easily surmountable for such a large enterprise. Right now, it’s making no money by trying to shave a bit off its anticipated outlay.
“At a point, they have to get back in the business of building airplanes,” he said.
