Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. We do have some
Speaker 1: breaking news out of Boeing. The CEO is saying that
Speaker 1: the manufacturer needs to restructure operations. Here are some of
Speaker 1: the details. Bowing to delay the launch of the seven
Speaker 1: seven seven X airplane by one year to twenty twenty six,
Speaker 1: and Boeing to cut ten percent of its workforce, warns
Speaker 1: of deeper third quarter losses. It's going to cut its
Speaker 1: total workforce by roughly ten percent. These job cuts to
Speaker 1: include its executives, managers and employees. This all coming, of course,
Speaker 1: amid a big cash burn by Boeing. Of course, we
Speaker 1: just concluded the fourth week of its strike. A lot
Speaker 1: of pain going on over at Boeing. You see the
Speaker 1: shares bouncing around after hours, initially spiking. Now back to
Speaker 1: unchanged traders trying to make sense of what's going on here.
Speaker 1: But what we know right now is that Boeing of
Speaker 1: course delaying the first delivery of its seven seven seventh
Speaker 1: seven seven X program to twenty twenty six. Also those
Speaker 1: job cuts. Boeing to cut its total workforce by roughly
Speaker 1: ten percent.
Speaker 2: Match. Yeah, this is awful news for Boeing, maybe worse
Speaker 2: news for the union. You know, each month of this
Speaker 2: strike is forecast to cost them one and a half
Speaker 2: billion dollars, not according to JP Morgan, but they already
Speaker 2: burned through eight and a half billion dollars in the
Speaker 2: first half, and because of that cash burn, they had
Speaker 2: to raise ten billion dollars in debt in the first half.
Speaker 2: Now Bloomberg has reported they're likely to raise another ten
Speaker 2: and a half or sorry, ten to fifteen billion dollars
Speaker 2: in a secondary offering in this half. And they said
Speaker 2: now that revenue is only going to be in the
Speaker 2: third quarter seventeen point eight billion. It had been estimated
Speaker 2: at eighteen point six billions. So they're not making any money,
Speaker 2: they're burning through cash because of this strike, and now
Speaker 2: they're going to have to cut or at least slow
Speaker 2: the delivery of the seven seven seven X program by
Speaker 2: another year. So it just really doesn't look good for
Speaker 2: the unions, for the for the workers that have gone
Speaker 2: on strike and have rejected an offer for a raise
Speaker 2: of what twenty five percent or thirty percent was the
Speaker 2: last offer something along those lines.
Speaker 1: I mean, the negotiations we know have really been locked
Speaker 1: and is stillmate, so really no progress being made again
Speaker 1: fascinating to see these headlines coming out of Boeing.
Speaker 2: We're going to get you, Bloomberg Intelligence senior Aerospace, Defense
Speaker 2: and Airlines analyst George Ferguson right now to weigh in
Speaker 2: on these headlines. George, really glad you could join us
Speaker 2: on such short notice on a Friday. What do you
Speaker 2: make first off of the delay of the seven seven
Speaker 2: seven X program. They say they won't be giving their
Speaker 2: first deliveries out until twenty twenty six. I don't know
Speaker 2: when they were planning to do it in the first place,
Speaker 2: so what do you know.
Speaker 3: Yeah, there's supposed to be a toy twenty five event,
Speaker 3: so pushed out what maybe about a year? This programs
Speaker 3: has some challenges getting to the finish line. So you know, look,
Speaker 3: it's not good. It's not a huge money maker for
Speaker 3: the company. In fact, it's not a money maker for
Speaker 3: the company right now, and so for the financials, not
Speaker 3: that important. For the customers who are waiting for airplanes,
Speaker 3: more disappointment. You always run the risk that they're going
Speaker 3: to go away. Biggest airplane in the sky now at
Speaker 3: the seven four to seven, A three eight are gone.
Speaker 3: So there are not a lot of good substitutes. So
Speaker 3: I'd say, yeah, disappointing, but not terrible.
Speaker 1: Talk to us about the labor picture here, because I
Speaker 1: mean the headline that's catching everyone's attention, in addition to
Speaker 1: the financial details that we got and those delays, is
Speaker 1: that Boeing to cut its total workforce by roughly ten percent,
Speaker 1: and interestingly, those reductions include executives, managers, employees. We know
Speaker 1: that Boeing is locked in that strike right now, that's
Speaker 1: stalemate with its union that has been going on for
Speaker 1: a month that they haven't been able to do manufacturing
Speaker 1: over on the West Coast. I mean, how does that
Speaker 1: factor into that month long strike?
Speaker 3: Yeah, tough times are ahead, and that's what CEO Kelly
Speaker 3: or Berg told the company when he told him there's
Speaker 3: going to be a ten percent cut. Tightening their belt here.
Speaker 3: It looks to me like they're posturing for the long haul,
Speaker 3: right they're telling to me, I think they're telling the union,
Speaker 3: you know, we're going to slim down. We need to
Speaker 3: save a bunch of money, and we're ready to kind
Speaker 3: of go to long haul on our negotiations with you.
Speaker 3: We're going to take pain on the executive side as well.
Speaker 3: And I think look, once the strike is over, there's still,
Speaker 3: you know, some pretty big challenges here for profitability, and
Speaker 3: so I think this is part of how they're going
Speaker 3: to address it. Yeah, a little bit surprising to me.
Speaker 1: But yeah, yeah, I know this coming from the Wall
Speaker 1: Street Journal, Ortberg saying in a message to employees while
Speaker 1: outlining this plan that we need to be clear eyed
Speaker 1: about the work we face the root and realistic about
Speaker 1: the time it will take to achieve key milestones. Clear
Speaker 1: Eyed definitely a phrase to underline there. We were talking
Speaker 1: a little bit about what this means for the space program.
Speaker 1: For example, we were having that conversation with David Weston
Speaker 1: and then you know, now we're having it too. When
Speaker 1: you think about what could go where Boeing could trim,
Speaker 1: what's the potential future of the space program here?
Speaker 3: Yeah, I mean there's a lot of small pieces and
Speaker 3: Boeing that you might be able to get rid of
Speaker 3: and make a little bit of money. But you know,
Speaker 3: I've heard a lot of people sort of talk about
Speaker 3: ge and their turnaround and how they hived off a
Speaker 3: bunch of businesses to raise cash. I just don't see
Speaker 3: that potential here. We even saw that at Rolls Royce
Speaker 3: or they hipped off a bunch of businesses. I think
Speaker 3: there's small stuff they could make cash with. I honestly
Speaker 3: don't think space is something they could make much in selling.
Speaker 3: I think musks, you know, musk SpaceX is really kind
Speaker 3: of taking it to the government launchers. I should say, you.
Speaker 1: Don't think SpaceX will buy the Boeing space program.
Speaker 3: I don't think so. Actually, I think that SpaceX has
Speaker 3: got the rockets they need, They've got the capsules they need.
Speaker 3: I personally think long term, I think Boeing does want
Speaker 3: to be in this space. I no pun attended, and
Speaker 3: so I think that they will push through with their
Speaker 3: space program. I think it's part of their government contracting.
Speaker 3: It should be part of their core competencies. I think
Speaker 3: they'll retain it, but I guess we'll see.
Speaker 1: And I'm hugging this conversation. Do you want to question
Speaker 1: mat Miller?
Speaker 2: Well, I just don't know how much leverage workers have,
Speaker 2: or if the workers have far less leverage. When the
Speaker 2: CEO comes in and says, you know what, I got
Speaker 2: to fire ten percent of this company, I'm not going
Speaker 2: to be able to deliver the products that I wanted
Speaker 2: to next year. How then, can the workers say thirty
Speaker 2: percent is not enough of a raise for us.
Speaker 3: Yeah, so I think again, and this is part of
Speaker 3: that posturing. I think if you're the union, though, you say,
Speaker 3: look at you know, a decade ago, we didn't get
Speaker 3: much at all. It's our turn to get our increase.
Speaker 3: And and they're seeing, I think, organized labor get it
Speaker 3: all over all over the economy. And I guess I
Speaker 3: would come back to you can't build the airplanes without
Speaker 3: the union. So I still think that despite this announcement today,
Speaker 3: I still think that there's more power with the workers
Speaker 3: right now. Again, now we're gonna and this is part
Speaker 3: of any Kelly orper getting ready to you know, ger
Speaker 3: the company to go a bit of a distance in
Speaker 3: the strike, maybe to get the union to rethink their position.
Speaker 3: But I still feel like the union has has has
Speaker 3: more strength here unless Boeing's willing to take a longer term, right,
Speaker 3: you know. I think that bear in mind they're building
Speaker 3: this seven thirty seven, which is the money maker and
Speaker 3: the way out of this out of this mess too.
Speaker 3: So to me, that's kind of like having one of
Speaker 3: the better chess pieces. I guess it's the Queen right.
Speaker 1: And George really quickly here. You think back to just
Speaker 1: a couple of days ago, you had S and P
Speaker 1: Global Ratings warning that they could downgrade Boeing to junk.
Speaker 1: I have to imagine maybe that's put a little bit
Speaker 1: more urgency at Kelly Orberg's heels. Do you think that
Speaker 1: these moves will save them necessarily, at least when it
Speaker 1: comes to the credit rating?
Speaker 3: You know, so this is a pre announcement. We don't
Speaker 3: typically see pre announcements out of Boeing. I personally think
Speaker 3: that this is a precursor to an equity issuance, and
Speaker 3: that maybe it comes next week. And I think they're
Speaker 3: gonna I think they're going to try to shore up
Speaker 3: the finances here next to go this long haul against
Speaker 3: the union, and I think it's you know, I think
Speaker 3: that the rating uncies are concerned. I will tell you
Speaker 3: the cash burn right we're looking very quickly at these numbers.
Speaker 3: Wasn't as bad as I feared. I think they're about
Speaker 3: ten and a half billion. Did they say in cash
Speaker 3: right now? That's enough to run the company? I thought
Speaker 3: they might be sub ten billion. Wasn't as bad as
Speaker 3: I had feared, So that might help the credit rating
Speaker 3: agencies and if you raise some equity here, if you
Speaker 3: raise ten twenty billion of equity, that might keep the
Speaker 3: rating acies happy as well, and that this might be
Speaker 3: designed to try to stay I think it is designed
Speaker 3: to save that off ten or twenty.
Speaker 2: I mean, there's a big difference between those two numbers.
Speaker 2: I've heard fifteen. Is that what you're hearing as well?
Speaker 3: I've heard between ten and twenty, So I don't know,
Speaker 3: maybe that is fifteen. I mean when you go to
Speaker 3: the equity markets, you know, I don't know what's the
Speaker 3: difference between ten and twenty. I think you know.
Speaker 2: Anyway, what's the difference was ten billion dollars between friends.
Speaker 2: George Great having on the program, Thank you so much
Speaker 2: for joining us on such short notice to talk about
Speaker 2: this breaking news. So Boeing to cut ten percent of
Speaker 2: its workforce and delay seven seven seven X deliveries