1
00:00:00,160 --> 00:00:07,720
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. We do have some

2
00:00:07,800 --> 00:00:11,239
Speaker 1: breaking news out of Boeing. The CEO is saying that

3
00:00:11,280 --> 00:00:15,400
Speaker 1: the manufacturer needs to restructure operations. Here are some of

4
00:00:15,440 --> 00:00:18,040
Speaker 1: the details. Bowing to delay the launch of the seven

5
00:00:18,120 --> 00:00:21,439
Speaker 1: seven seven X airplane by one year to twenty twenty six,

6
00:00:21,920 --> 00:00:26,040
Speaker 1: and Boeing to cut ten percent of its workforce, warns

7
00:00:26,079 --> 00:00:29,040
Speaker 1: of deeper third quarter losses. It's going to cut its

8
00:00:29,040 --> 00:00:33,320
Speaker 1: total workforce by roughly ten percent. These job cuts to

9
00:00:33,360 --> 00:00:37,840
Speaker 1: include its executives, managers and employees. This all coming, of course,

10
00:00:37,920 --> 00:00:41,519
Speaker 1: amid a big cash burn by Boeing. Of course, we

11
00:00:41,680 --> 00:00:44,800
Speaker 1: just concluded the fourth week of its strike. A lot

12
00:00:44,840 --> 00:00:46,600
Speaker 1: of pain going on over at Boeing. You see the

13
00:00:46,600 --> 00:00:49,960
Speaker 1: shares bouncing around after hours, initially spiking. Now back to

14
00:00:50,040 --> 00:00:53,519
Speaker 1: unchanged traders trying to make sense of what's going on here.

15
00:00:53,560 --> 00:00:56,120
Speaker 1: But what we know right now is that Boeing of

16
00:00:56,160 --> 00:00:59,880
Speaker 1: course delaying the first delivery of its seven seven seventh

17
00:01:00,120 --> 00:01:03,160
Speaker 1: seven seven X program to twenty twenty six. Also those

18
00:01:03,240 --> 00:01:06,319
Speaker 1: job cuts. Boeing to cut its total workforce by roughly

19
00:01:06,360 --> 00:01:06,919
Speaker 1: ten percent.

20
00:01:06,959 --> 00:01:11,679
Speaker 2: Match. Yeah, this is awful news for Boeing, maybe worse

21
00:01:11,800 --> 00:01:16,959
Speaker 2: news for the union. You know, each month of this

22
00:01:17,120 --> 00:01:20,280
Speaker 2: strike is forecast to cost them one and a half

23
00:01:20,360 --> 00:01:23,600
Speaker 2: billion dollars, not according to JP Morgan, but they already

24
00:01:23,640 --> 00:01:26,200
Speaker 2: burned through eight and a half billion dollars in the

25
00:01:26,240 --> 00:01:29,800
Speaker 2: first half, and because of that cash burn, they had

26
00:01:29,840 --> 00:01:32,919
Speaker 2: to raise ten billion dollars in debt in the first half.

27
00:01:33,400 --> 00:01:35,840
Speaker 2: Now Bloomberg has reported they're likely to raise another ten

28
00:01:35,880 --> 00:01:39,039
Speaker 2: and a half or sorry, ten to fifteen billion dollars

29
00:01:39,200 --> 00:01:42,839
Speaker 2: in a secondary offering in this half. And they said

30
00:01:42,880 --> 00:01:44,800
Speaker 2: now that revenue is only going to be in the

31
00:01:44,840 --> 00:01:47,440
Speaker 2: third quarter seventeen point eight billion. It had been estimated

32
00:01:47,440 --> 00:01:52,120
Speaker 2: at eighteen point six billions. So they're not making any money,

33
00:01:52,280 --> 00:01:55,800
Speaker 2: they're burning through cash because of this strike, and now

34
00:01:55,800 --> 00:01:58,520
Speaker 2: they're going to have to cut or at least slow

35
00:01:58,600 --> 00:02:01,880
Speaker 2: the delivery of the seven seven seven X program by

36
00:02:02,000 --> 00:02:07,080
Speaker 2: another year. So it just really doesn't look good for

37
00:02:07,160 --> 00:02:10,120
Speaker 2: the unions, for the for the workers that have gone

38
00:02:10,160 --> 00:02:14,040
Speaker 2: on strike and have rejected an offer for a raise

39
00:02:14,160 --> 00:02:16,320
Speaker 2: of what twenty five percent or thirty percent was the

40
00:02:16,360 --> 00:02:17,919
Speaker 2: last offer something along those lines.

41
00:02:17,960 --> 00:02:20,600
Speaker 1: I mean, the negotiations we know have really been locked

42
00:02:20,600 --> 00:02:24,320
Speaker 1: and is stillmate, so really no progress being made again

43
00:02:24,440 --> 00:02:26,800
Speaker 1: fascinating to see these headlines coming out of Boeing.

44
00:02:27,160 --> 00:02:31,639
Speaker 2: We're going to get you, Bloomberg Intelligence senior Aerospace, Defense

45
00:02:31,720 --> 00:02:34,960
Speaker 2: and Airlines analyst George Ferguson right now to weigh in

46
00:02:35,400 --> 00:02:39,799
Speaker 2: on these headlines. George, really glad you could join us

47
00:02:40,000 --> 00:02:42,720
Speaker 2: on such short notice on a Friday. What do you

48
00:02:42,800 --> 00:02:47,200
Speaker 2: make first off of the delay of the seven seven

49
00:02:47,320 --> 00:02:50,600
Speaker 2: seven X program. They say they won't be giving their

50
00:02:50,639 --> 00:02:54,800
Speaker 2: first deliveries out until twenty twenty six. I don't know

51
00:02:54,840 --> 00:02:56,560
Speaker 2: when they were planning to do it in the first place,

52
00:02:56,600 --> 00:02:57,280
Speaker 2: so what do you know.

53
00:02:58,320 --> 00:03:01,480
Speaker 3: Yeah, there's supposed to be a toy twenty five event,

54
00:03:01,800 --> 00:03:06,960
Speaker 3: so pushed out what maybe about a year? This programs

55
00:03:07,000 --> 00:03:11,680
Speaker 3: has some challenges getting to the finish line. So you know, look,

56
00:03:12,480 --> 00:03:15,080
Speaker 3: it's not good. It's not a huge money maker for

57
00:03:15,120 --> 00:03:16,800
Speaker 3: the company. In fact, it's not a money maker for

58
00:03:16,800 --> 00:03:21,400
Speaker 3: the company right now, and so for the financials, not

59
00:03:21,480 --> 00:03:24,200
Speaker 3: that important. For the customers who are waiting for airplanes,

60
00:03:24,720 --> 00:03:26,920
Speaker 3: more disappointment. You always run the risk that they're going

61
00:03:26,960 --> 00:03:30,320
Speaker 3: to go away. Biggest airplane in the sky now at

62
00:03:30,400 --> 00:03:33,440
Speaker 3: the seven four to seven, A three eight are gone.

63
00:03:33,760 --> 00:03:35,680
Speaker 3: So there are not a lot of good substitutes. So

64
00:03:35,960 --> 00:03:39,360
Speaker 3: I'd say, yeah, disappointing, but not terrible.

65
00:03:39,960 --> 00:03:42,400
Speaker 1: Talk to us about the labor picture here, because I

66
00:03:42,480 --> 00:03:45,480
Speaker 1: mean the headline that's catching everyone's attention, in addition to

67
00:03:45,520 --> 00:03:48,440
Speaker 1: the financial details that we got and those delays, is

68
00:03:48,440 --> 00:03:52,440
Speaker 1: that Boeing to cut its total workforce by roughly ten percent,

69
00:03:52,640 --> 00:03:57,080
Speaker 1: and interestingly, those reductions include executives, managers, employees. We know

70
00:03:57,200 --> 00:04:00,720
Speaker 1: that Boeing is locked in that strike right now, that's

71
00:04:00,760 --> 00:04:03,360
Speaker 1: stalemate with its union that has been going on for

72
00:04:03,440 --> 00:04:06,960
Speaker 1: a month that they haven't been able to do manufacturing

73
00:04:07,240 --> 00:04:09,240
Speaker 1: over on the West Coast. I mean, how does that

74
00:04:09,320 --> 00:04:11,520
Speaker 1: factor into that month long strike?

75
00:04:12,680 --> 00:04:16,520
Speaker 3: Yeah, tough times are ahead, and that's what CEO Kelly

76
00:04:16,640 --> 00:04:18,400
Speaker 3: or Berg told the company when he told him there's

77
00:04:18,400 --> 00:04:21,359
Speaker 3: going to be a ten percent cut. Tightening their belt here.

78
00:04:22,200 --> 00:04:24,279
Speaker 3: It looks to me like they're posturing for the long haul,

79
00:04:24,360 --> 00:04:27,159
Speaker 3: right they're telling to me, I think they're telling the union,

80
00:04:27,800 --> 00:04:30,760
Speaker 3: you know, we're going to slim down. We need to

81
00:04:30,760 --> 00:04:32,640
Speaker 3: save a bunch of money, and we're ready to kind

82
00:04:32,640 --> 00:04:35,240
Speaker 3: of go to long haul on our negotiations with you.

83
00:04:35,320 --> 00:04:38,599
Speaker 3: We're going to take pain on the executive side as well.

84
00:04:39,200 --> 00:04:43,040
Speaker 3: And I think look, once the strike is over, there's still,

85
00:04:43,200 --> 00:04:48,520
Speaker 3: you know, some pretty big challenges here for profitability, and

86
00:04:48,560 --> 00:04:50,440
Speaker 3: so I think this is part of how they're going

87
00:04:50,480 --> 00:04:53,040
Speaker 3: to address it. Yeah, a little bit surprising to me.

88
00:04:53,040 --> 00:04:55,760
Speaker 1: But yeah, yeah, I know this coming from the Wall

89
00:04:55,760 --> 00:04:59,400
Speaker 1: Street Journal, Ortberg saying in a message to employees while

90
00:04:59,400 --> 00:05:02,320
Speaker 1: outlining this plan that we need to be clear eyed

91
00:05:02,440 --> 00:05:04,839
Speaker 1: about the work we face the root and realistic about

92
00:05:04,880 --> 00:05:09,119
Speaker 1: the time it will take to achieve key milestones. Clear

93
00:05:09,160 --> 00:05:12,000
Speaker 1: Eyed definitely a phrase to underline there. We were talking

94
00:05:12,000 --> 00:05:14,560
Speaker 1: a little bit about what this means for the space program.

95
00:05:14,880 --> 00:05:17,480
Speaker 1: For example, we were having that conversation with David Weston

96
00:05:17,520 --> 00:05:19,880
Speaker 1: and then you know, now we're having it too. When

97
00:05:19,880 --> 00:05:23,719
Speaker 1: you think about what could go where Boeing could trim,

98
00:05:23,880 --> 00:05:26,320
Speaker 1: what's the potential future of the space program here?

99
00:05:27,320 --> 00:05:29,240
Speaker 3: Yeah, I mean there's a lot of small pieces and

100
00:05:29,360 --> 00:05:31,039
Speaker 3: Boeing that you might be able to get rid of

101
00:05:31,080 --> 00:05:33,560
Speaker 3: and make a little bit of money. But you know,

102
00:05:33,720 --> 00:05:35,480
Speaker 3: I've heard a lot of people sort of talk about

103
00:05:36,040 --> 00:05:38,400
Speaker 3: ge and their turnaround and how they hived off a

104
00:05:38,400 --> 00:05:40,960
Speaker 3: bunch of businesses to raise cash. I just don't see

105
00:05:40,960 --> 00:05:43,920
Speaker 3: that potential here. We even saw that at Rolls Royce

106
00:05:43,960 --> 00:05:45,960
Speaker 3: or they hipped off a bunch of businesses. I think

107
00:05:45,960 --> 00:05:48,839
Speaker 3: there's small stuff they could make cash with. I honestly

108
00:05:48,880 --> 00:05:52,240
Speaker 3: don't think space is something they could make much in selling.

109
00:05:52,320 --> 00:05:57,040
Speaker 3: I think musks, you know, musk SpaceX is really kind

110
00:05:57,040 --> 00:06:01,880
Speaker 3: of taking it to the government launchers. I should say, you.

111
00:06:01,880 --> 00:06:05,360
Speaker 1: Don't think SpaceX will buy the Boeing space program.

112
00:06:05,800 --> 00:06:08,920
Speaker 3: I don't think so. Actually, I think that SpaceX has

113
00:06:08,960 --> 00:06:12,320
Speaker 3: got the rockets they need, They've got the capsules they need.

114
00:06:13,040 --> 00:06:17,000
Speaker 3: I personally think long term, I think Boeing does want

115
00:06:17,000 --> 00:06:21,640
Speaker 3: to be in this space. I no pun attended, and

116
00:06:21,720 --> 00:06:24,640
Speaker 3: so I think that they will push through with their

117
00:06:24,640 --> 00:06:27,680
Speaker 3: space program. I think it's part of their government contracting.

118
00:06:27,720 --> 00:06:31,400
Speaker 3: It should be part of their core competencies. I think

119
00:06:31,440 --> 00:06:34,000
Speaker 3: they'll retain it, but I guess we'll see.

120
00:06:34,520 --> 00:06:37,080
Speaker 1: And I'm hugging this conversation. Do you want to question

121
00:06:37,120 --> 00:06:37,560
Speaker 1: mat Miller?

122
00:06:37,680 --> 00:06:41,040
Speaker 2: Well, I just don't know how much leverage workers have,

123
00:06:41,240 --> 00:06:44,120
Speaker 2: or if the workers have far less leverage. When the

124
00:06:44,160 --> 00:06:46,560
Speaker 2: CEO comes in and says, you know what, I got

125
00:06:46,560 --> 00:06:49,120
Speaker 2: to fire ten percent of this company, I'm not going

126
00:06:49,200 --> 00:06:51,000
Speaker 2: to be able to deliver the products that I wanted

127
00:06:51,040 --> 00:06:54,839
Speaker 2: to next year. How then, can the workers say thirty

128
00:06:54,880 --> 00:06:56,960
Speaker 2: percent is not enough of a raise for us.

129
00:06:59,000 --> 00:07:00,680
Speaker 3: Yeah, so I think again, and this is part of

130
00:07:00,720 --> 00:07:03,520
Speaker 3: that posturing. I think if you're the union, though, you say,

131
00:07:03,560 --> 00:07:05,360
Speaker 3: look at you know, a decade ago, we didn't get

132
00:07:05,480 --> 00:07:08,640
Speaker 3: much at all. It's our turn to get our increase.

133
00:07:10,280 --> 00:07:13,960
Speaker 3: And and they're seeing, I think, organized labor get it

134
00:07:14,280 --> 00:07:18,640
Speaker 3: all over all over the economy. And I guess I

135
00:07:18,680 --> 00:07:22,160
Speaker 3: would come back to you can't build the airplanes without

136
00:07:22,200 --> 00:07:28,119
Speaker 3: the union. So I still think that despite this announcement today,

137
00:07:28,200 --> 00:07:33,320
Speaker 3: I still think that there's more power with the workers

138
00:07:33,360 --> 00:07:35,240
Speaker 3: right now. Again, now we're gonna and this is part

139
00:07:35,280 --> 00:07:39,040
Speaker 3: of any Kelly orper getting ready to you know, ger

140
00:07:39,200 --> 00:07:41,400
Speaker 3: the company to go a bit of a distance in

141
00:07:41,440 --> 00:07:45,640
Speaker 3: the strike, maybe to get the union to rethink their position.

142
00:07:46,760 --> 00:07:50,000
Speaker 3: But I still feel like the union has has has

143
00:07:50,440 --> 00:07:56,000
Speaker 3: more strength here unless Boeing's willing to take a longer term, right,

144
00:07:56,640 --> 00:07:59,800
Speaker 3: you know. I think that bear in mind they're building

145
00:07:59,800 --> 00:08:02,520
Speaker 3: this seven thirty seven, which is the money maker and

146
00:08:02,560 --> 00:08:05,080
Speaker 3: the way out of this out of this mess too.

147
00:08:05,200 --> 00:08:08,600
Speaker 3: So to me, that's kind of like having one of

148
00:08:08,600 --> 00:08:11,560
Speaker 3: the better chess pieces. I guess it's the Queen right.

149
00:08:11,440 --> 00:08:14,200
Speaker 1: And George really quickly here. You think back to just

150
00:08:14,240 --> 00:08:15,560
Speaker 1: a couple of days ago, you had S and P

151
00:08:15,680 --> 00:08:20,080
Speaker 1: Global Ratings warning that they could downgrade Boeing to junk.

152
00:08:20,120 --> 00:08:23,160
Speaker 1: I have to imagine maybe that's put a little bit

153
00:08:23,240 --> 00:08:26,960
Speaker 1: more urgency at Kelly Orberg's heels. Do you think that

154
00:08:27,400 --> 00:08:31,040
Speaker 1: these moves will save them necessarily, at least when it

155
00:08:31,040 --> 00:08:32,040
Speaker 1: comes to the credit rating?

156
00:08:33,040 --> 00:08:35,040
Speaker 3: You know, so this is a pre announcement. We don't

157
00:08:35,040 --> 00:08:38,920
Speaker 3: typically see pre announcements out of Boeing. I personally think

158
00:08:38,960 --> 00:08:42,080
Speaker 3: that this is a precursor to an equity issuance, and

159
00:08:42,120 --> 00:08:44,440
Speaker 3: that maybe it comes next week. And I think they're

160
00:08:44,480 --> 00:08:47,440
Speaker 3: gonna I think they're going to try to shore up

161
00:08:47,440 --> 00:08:51,160
Speaker 3: the finances here next to go this long haul against

162
00:08:51,160 --> 00:08:55,520
Speaker 3: the union, and I think it's you know, I think

163
00:08:55,520 --> 00:08:58,440
Speaker 3: that the rating uncies are concerned. I will tell you

164
00:08:58,480 --> 00:09:02,800
Speaker 3: the cash burn right we're looking very quickly at these numbers.

165
00:09:03,800 --> 00:09:06,800
Speaker 3: Wasn't as bad as I feared. I think they're about

166
00:09:06,840 --> 00:09:08,800
Speaker 3: ten and a half billion. Did they say in cash

167
00:09:08,880 --> 00:09:12,719
Speaker 3: right now? That's enough to run the company? I thought

168
00:09:12,760 --> 00:09:15,440
Speaker 3: they might be sub ten billion. Wasn't as bad as

169
00:09:15,480 --> 00:09:18,560
Speaker 3: I had feared, So that might help the credit rating

170
00:09:18,840 --> 00:09:21,520
Speaker 3: agencies and if you raise some equity here, if you

171
00:09:21,679 --> 00:09:25,480
Speaker 3: raise ten twenty billion of equity, that might keep the

172
00:09:25,559 --> 00:09:28,600
Speaker 3: rating acies happy as well, and that this might be

173
00:09:28,640 --> 00:09:30,760
Speaker 3: designed to try to stay I think it is designed

174
00:09:30,760 --> 00:09:32,640
Speaker 3: to save that off ten or twenty.

175
00:09:33,280 --> 00:09:35,520
Speaker 2: I mean, there's a big difference between those two numbers.

176
00:09:35,760 --> 00:09:37,720
Speaker 2: I've heard fifteen. Is that what you're hearing as well?

177
00:09:39,320 --> 00:09:41,000
Speaker 3: I've heard between ten and twenty, So I don't know,

178
00:09:41,000 --> 00:09:42,760
Speaker 3: maybe that is fifteen. I mean when you go to

179
00:09:42,760 --> 00:09:45,640
Speaker 3: the equity markets, you know, I don't know what's the

180
00:09:45,640 --> 00:09:47,120
Speaker 3: difference between ten and twenty. I think you know.

181
00:09:48,600 --> 00:09:51,520
Speaker 2: Anyway, what's the difference was ten billion dollars between friends.

182
00:09:51,559 --> 00:09:53,679
Speaker 2: George Great having on the program, Thank you so much

183
00:09:53,720 --> 00:09:57,600
Speaker 2: for joining us on such short notice to talk about

184
00:09:57,600 --> 00:10:00,680
Speaker 2: this breaking news. So Boeing to cut ten percent of

185
00:10:00,720 --> 00:10:04,319
Speaker 2: its workforce and delay seven seven seven X deliveries