Boeing Considers Asset Sales to Boost Cash Reserves
Boeing is reportedly contemplating asset sales as a strategy to bolster its cash reserves amidst business struggles, according to a report by The Wall Street Journal. This follows a tentative labor contract agreement reached between Boeing and union leaders that could soon bring an end to the costly months-long labor strike. Earlier in the week, Boeing also filed a $25 billion shelf registration aimed at providing a range of capital options to support the company's balance sheet over a three-year period.
Boeing's Board Discusses Potential Asset Sales
The report refers to a recent meeting between Boeing's board and executives at its Arlington, Virginia headquarters. The discussion revolved around potential asset sales, with executives and board members reviewing internal reports on the status of each of the planemaker's units.
Just a few weeks ago, Boeing CEO Kelly Ortberg informed employees about the need to be realistic about the challenges ahead. He emphasized the importance of focusing resources on performance and innovation in areas that are central to the company's identity.
Ortberg's First Public Comments as CEO Expected Soon
Ortberg, who took over from Dave Calhoun as president and CEO of Boeing on August 8, is expected to make his first public comments in his new role on Wednesday. This will follow the International Association of Machinists and Aerospace Workers' vote on the new labor contract. The company has estimated the strike to cost $1 billion and has warned of a $6 billion quarterly loss for the period ending September 30.
Boeing Announces Workforce Reduction and Shelf Registration
Earlier in the week, Boeing announced plans to reduce its workforce by 10% due to increasing financial pressure. This includes dwindling cash reserves, the risk of a credit downgrade, and the ongoing strike. Following this announcement, the troubled planemaker filed a $25 billion shelf registration.
In the filing, Boeing stated that the universal shelf registration offers the company flexibility to explore various capital options as needed to support the company's balance sheet over a three-year period.
Boeing Enters into a $10 Billion Credit Agreement
In addition to the shelf registration, Boeing also entered into a $10 billion "supplemental credit agreement" with a consortium of lenders. The company noted that the credit facility offers "additional short-term access to liquidity as we navigate through a challenging environment." It added that it has not drawn down on this facility or its existing credit revolver.
Boeing Considers Selling Joint Venture
Boeing has reportedly considered selling its rocket-launching joint venture, United Launch Alliance, with Lockheed Martin to Sierra Space for between $2 billion and $3 billion. Furthermore, Boeing's space division is currently in crisis following the malfunctioning of the Starliner spacecraft.
In related news, Boeing's competitor, Airbus, recently laid off 2,500 jobs in its space division as Elon Musk's SpaceX continues to dominate rocket launches and lead the space race in this solar system.
Boeing Urged to Refocus on Fundamentals
Critics argue that Boeing's focus on DEI, climate, and gender justice has been detrimental. They suggest that the company needs to refocus on the fundamentals, such as building planes that actually stay in the sky.
Bottom Line
Boeing's consideration of asset sales to raise cash for its struggling business is indicative of the financial pressures the company is currently facing. The planemaker is grappling with a range of challenges, including a costly labor strike, dwindling cash reserves, and a potential credit downgrade. As Boeing navigates these turbulent times, it will be interesting to see how the company's strategies evolve. What are your thoughts on this development? Feel free to share this article with your friends. And don't forget, you can sign up for the Daily Briefing, which is delivered every day at 6pm.
