Boeing stock at 52-week lows as plane maker furloughs workers to preserve cash

After a tumultuous year, the last thing Boeing needed was a union strike.

Shares of the aircraft manufacturing giant touched new 52-week lows on Friday as a labor dispute involving its largest unionized workforce — the International Association of Machinists and Aerospace Workers (IAM) — was set to enter into a second week.

“Boeing — its entire infrastructure, its entire founding, if you will — right now is under severe stress. I think they’re going to be forced to try to settle this as quickly as they can,” Mike Boyd, president of aviation research and consulting company Boyd Group International, told Yahoo Finance in a recent interview.

It’s estimated that the first full week of the strike has already cost Boeing’s workers and shareholders at least $571 million, according to consulting firm Anderson Economic Group.

This past week, Boeing laid out aggressive cost-cutting measures culminating in the announcement of temporary furloughs expected to impact “a large number” of executives, managers, and employees.

“While this is a tough decision that impacts everybody, it is in an effort to preserve our long-term future and help us navigate through this very difficult time,” Boeing’s CEO Kelly Ortberg wrote in a note to employees on Wednesday.

Ortberg, who took over the CEO job last month, said he and his leadership team would also take a pay cut for the duration of the strike.

Boeing wing mechanic lead Lee Lara, who has worked for the company for 16 years, yells in response to honks from passing drivers as workers wave picket signs while striking after union members voted to reject a contract offer, Sunday, Sept. 15, 2024, near the company's factory in Everett, Wash. (AP Photo/Lindsey Wasson) — Boeing wing mechanic lead Lee Lara, who has worked for the company for 16 years, yells while striking after union members voted to reject a contract offer, Sunday, Sept. 15, 2024, near the company’s factory in Everett, Wash. (AP Photo/Lindsey Wasson) (ASSOCIATED PRESS)

While Moody’s recently placed Boeing’s credit rating under review, S&P Global said its status is safe for now, provided the strike is short-lived.

“A shorter strike, on the order of weeks, would likely be manageable for Boeing and not lead to a negative rating action. However, we believe an extended strike would be costly and difficult to absorb, given the company’s already strained financial position,” said S&P said in a statement this week.

Wall Street analysts anticipate the company will seek to raise cash by selling stock. At the end of the second quarter, Boeing had roughly $58 billion in total debt and $12.6 billion in cash.

“BA could target liquidity to support debt paydown over the next 18 months,” wrote Jefferies analysts in a recent note.

It remains to be seen how patient investors will be about the ongoing dispute at a time when the company is aiming to ramp production of its bestselling 737 Max jets to 38 per month by the end of the year, up from roughly 25 per month in June and July.

Morningstar equity analyst Nicolas Owens wrote in a recent note that Boeing’s relationship with its machinist union has been “contentious” for decades and that he expects the strike could last through the holidays until the end of the year.

The analyst lowered his price target on the stock to $216 per share from $219 to reflect loss of productivity in the fourth quarter of 2024 and slowing production ramp-ups in subsequent periods.

“[Boeing has] a lot of pressure to get their assembly line in good order,” Owens told Yahoo Finance on Monday. “And the strike interferes with that and delays any progress they were making on basically recertifying their assembly process for planes like the 737.”

IAM members went on strike last Friday after rejecting a contract offer from Boeing. The incident is a test of the company’s new management and recovery from a series of mishaps this year.

In early January, the fuselage of a 737 Max 9 ripped open during an Alaska Airlines (ALK) flight, sparking a series of regulatory investigations, a production overhaul, and a CEO replacement.

Last month Ortberg, an aerospace industry veteran and Boeing outsider, took over the top job at the company.

At a Morgan Stanley conference, CFO Brian West recently noted “good momentum” prior to the strike, with “ramping production, while, at the same time, incorporating significant improvements” into the manufacturer’s quality and production system.

The union and Boeing met on Tuesday and Wednesday with a mediator to facilitate talks.

Boeing is “ready to hammer out an agreement,” a source close to the negotiations told Yahoo Finance earlier this week.

But after two full days of mediation, the two sides seemed far apart.

“Throughout the day, we conveyed the priorities of our members to the company via the mediator. Unfortunately, mediation concluded today without reaching any resolution,” read an update on IAM’s website.

The update said there are no additional discussion dates scheduled.

Boeing shares are down more than 35% year to date. The company is expected to report quarterly results next month.