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