Boeing announced a $6bn loss for the quarter and warned that it would continue bleeding cash. The new CEO Kelly Ortberg said the plane maker had to overhaul its culture in order to end the multi-year crisis which has shaken customers’ and investors’ confidence.
The plane manufacturer burned $2bn of cash in the third-quarter, bringing its total outflow this year to $10bn. Brian West, chief financial officer of Boeing, said that the company would use cash to increase production of the new 737 Max as well as expand inventory of the new 777X in 2025. However, he added that the amount of cash used would be lower than it was in 2024.
He said, “It will turn in the second [half] of 2025. We’ll then exit with more energy as the factories recover and heal.” Ortberg said that it was “too soon” to predict whether Boeing will stick to a 2022 target of generating $10bn free cash flow either in 2025 or in 2026.
Boeing’s new CEO informed employees and investors of the company’s “crossroads”. He said that “serious performance failures” led to a decline in trust, rising debts and customer dissatisfaction. He said he wanted the business to be stabilized, its production processes improved, and executives “closely integrated” with the business and those who design and produce our products.
His comments coincided with the day that 33,000 machinists at the company in Washington were voting to accept or reject a proposed agreement. This would have ended a strike of nearly six weeks. The offer includes a performance-based bonus and improved retirement benefits, but it does not restore the defined benefit pension many workers are still angry about having lost following an intense fight back in 2014.
Ortberg expressed his “high hopes” that the agreement would bring an end to the strike.
Contrary to his predecessor Dave Calhoun who moved from Florida to Boeing’s Washington manufacturing hub after joining the firm, Ortberg did not. He said Wednesday that “we need to be in the factories, the backshops and our engineering laboratories.” “We need the information.”
He said that the company must also develop a new aircraft “at the appropriate time in the future”. “But we have much work to do” before then, including “restoring our balance sheet to ensure we have a clear path to the next aviation commercial.”
US aerospace giant, which has been in crisis most of the last five years, has spent billions this year trying to fix quality and manufacturing issues after a door panel blew off a commercial plane in January. Ortberg announced this month that 17,000 jobs would be cut “to align the workforce with our financial realities”.
The company announced earlier this month it would take a charge of $5bn during the third-quarter, and report losses of $9.97 a share — almost four times greater than the third-quarter of 2023 — based on $17.8bn of revenue.
The delay in delivering the 777X plane by an additional year to 2026 – six years after airlines had been promised their planes – resulted in $2.6 billion of charges. Losses on fixed-priced defence contracts accounted for another $2bn, while about $400mn was a result of the work stoppage, as well as the decision to cease production of the 767 by 2027. However, the military version, the KC-46A refuelling tanks, will still be produced.
Ortberg stated that Boeing will not abandon its loss-making defence contracts which produce products vital to the US government, Boeing’s most important client. He said that walking away wasn’t the answer.
Boeing announced last week that it could raise up to $25bn in equity over the next three years, but declined to elaborate on the timing or size of the equity raising. The manufacturer held $10.5bn of cash and marketable securities by the end the third quarter. This was just over the threshold required for its operations. It is actively managing its liquidity.
Boeing shares fell 1.8 percent on Wednesday, and now trade 37.6 percent below their starting point for the year.
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