Tuesday, January 21, 2020

Here's why Boeing fired its CEO

Last month the Boeing Board of Directors fired its CEO over the 737 MAX disaster.  It has been a huge financial loss to the company and he was't getting the bleeding stopped.  Here's how bad it is:
Boeing is aiming to borrow $10 billion or more to help it get through the 737 Max crisis, CNBC reported today, citing people familiar with the matter.
You might say that they need more financial runway to get this bird off the ground.
Boeing's debt load has already increased substantially over the past year. Boeing had $20.3 billion in long-term debt as of September 30, 2019, nearly double the $10.7 billion of long-term debt it had on December 31, 2018, according to a Boeing SEC filing. By contrast, Boeing added less than $1 billion in long-term debt in all of 2017.
So the balance sheet is turning a bright shade of red.
Boeing in October reported Q3 2019 revenue of $20 billion, down from $25.1 billion year-over-year. Revenue for the first nine months of 2019 was $58.6 billion, down 19 percent year-over-year. Net earnings in Q3 2019 were $1.2 billion, down from $2.4 billion in Q3 2018.
In July 2019, Boeing announced an after-tax charge of $4.9 billion to cover "potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays."
The 737 MAX looks to be around a $10B drain on the company to date.  No wonder they're borrowing money.  Man, relocating their company HQ to Chicago sure was a genius move, wasn't it?

3 comments:

UK Houston said...

Others have also pointed out (Wolf Richter) that Boeing spent $43 billion ... with a B ... on share buybacks in the last few years. So they stripped equity instead of spending money on engineering and now they have to take on debt to cover the costs of their mistakes.

Beans said...

There's an unwritten 'Headquarters' rule for businesses.

You know the business/company/corporation is going to either die or have a big die-off of personnel, locations, the business etc., when the suits build themselves a palace for a headquarters, either on the grounds or, worse, far away from the actual production facilities.

Seen it every time.

So what does Boeing do? They go build a palace far away from their roots. Sure sign of impending doom.

Innocent Bystander said...

It won't happen this year because Boeing's decline, while serious, isn't yet steep enough, but it wouldn't surprise me to see a quiet merger 18-24 months from now, or at least a quite substantial restructuring that results in transfer of a lesser product line to a different manufacturer. The tipoff will be slight sales declines of their other models which have an oversized impact on the balance sheet.