The Boeing machinists’ strike compounds issues facing the company since its acquisition of McDonnel Douglas aerospace Co.
Yet, with the new Boeing CEO Kelly Ortberg, just over a month into his tenure — this unnecessary strike comes at exactly the wrong time…
This is the eighth strike by machinists in Boeing’s 108-year history — yet it comes as the company faces intense regulatory scrutiny, production delays, quality issues and increasing debt.
Historically machinists strikes at Boeing average about 50 days, the last one 57 days taking Boeing 2 years to recover, however the machinest walked away with very little to show for two months off the job. Back then in 2008, Boeing had record profits and a record backlog of orders exceeding 3000 aircraft.
The company back then threatened to shut production in Washington state and move it east.
Should the company decide they can’t afford to make previous threats stick, can’t afford the effects of lost productivity, can’t afford their stock price dropping more, can’t afford another layer of struggle in its current recovery from production delays and can’t afford its credit rating to tank, if the strike is prolonged, making borrowing or raising debt more difficult — then one would bet that this strike will be shortened.
Hours after about 33,000 workers walked off the job, debt-ratings firms warned of possible downgrades to junk status if the strike lasts more than a week or two. Members of the International Association of Machinists and Aerospace Workers are in a standoff not only with management but also with union leadership, having rejected a new contract with 96% of the vote. Boeing’s net debt totals over $45 billion and it’s been “bleeding cash,” according to Bloomberg.
- One Jefferies analyst estimated that a 30-day strike could cost the aerospace giant as much as $1.5 billion.
- Prior to the vote, Ortberg made an overture to workers, asking them “not to sacrifice the opportunity to secure our future together, because of the frustrations of the past.”
- There is increased chatter in DC about breaking the Company apart, same as the Feds did just before World War II…
Because that is what happens when a Strategic company’s employees go on strike, or when its balance sheet faces a storm, and also when the Military contracts cannot be fulfilled.
Boeing is currently in the eye of that storm. With the recent machinist strike, the stakes are high. Ratings firms are sounding alarms, warning that prolonged work stoppages could plunge Boeing’s debt into junk status. This isn’t just a financial hiccup; it’s a wake-up call for board directors everywhere due to labor issues and other headwinds.
This situation is a critical reminder for all board directors, especially when engaging on capital allocation with CIOs and CFOs. The sooner we address balance sheet issues, the better we can protect cash flow and ensure long-term sustainability.
As a board director with over 35 years of experience, I’ve seen firsthand how critical it is to understand the real costs and risks of poor cash management. The question isn’t just whether Boeing is at risk of insolvency; it’s about how we, as leaders, can prevent such crises in our own organizations.
Just follow the First principle which is abundantly simple:
Then, just follow the crumbs and ensure that your company’s return on capital ought to exceed the cost of capital.
This is the baseline for moving forward. Trying to increase profitability on individual products or businesses can eventually lead to driving growth down. Focusing solely on short-term profits can also lead to sacrificing long-term stability in the pursuit of growth. Instead, companies should prioritize earning sustainable, high-quality profits in order to maintain long-term survival.
A “T” shaped board director—someone who possesses both depth and breadth of knowledge—can make all the difference. These directors ask tough questions and engage deeply in planning, balancing short and long-term objectives. They understand that as revenues grow, so does inventory, which can consume precious cash flow.
In today’s fast-paced environment, AI can be a game-changer. It’s not just about automation; it’s about doubling down on product-led growth strategies and increasing the velocity of value creation. Focused innovation and strategic capital expenditure are essential to build the capacity we need to thrive.
Activist investors, passive PE dealers, institutional investors of any stripe, the CEOs, CFOs, and their respective boards must prioritize, high-quality earnings and sustainable business models, for long-term success. Recently, I engaged in an insightful discussion with You all.
So, I ask you: Are you prepared to navigate the complexities of cash management and capital allocation in your organization?
At the very end of this post, you can also share your thoughts on how shareholders, boards and directors, can better oversee risks associated with Company’s culture failures, employee strikes, runaway debt, cash flow, corporate bonds, secured debt, junk bonds, working capital and capital allocations.
And what of it?
In today’s climate, focusing on high-quality earnings and building sustainable business models is crucial for long-term survival. Our framework emphasizes the importance of prioritizing sustainable growth over short-term profits and building a culture that values these principles at every level of the organization. By sticking to these principles and continuously innovating and adapting, companies can maintain stability and thrive in unpredictable times.
Yours,
Dr Churchill
PS:
Boeing needs to find a New Vision and that might be the only way to prevent the Company from being broken apart.
The cooperation of the new CEO with the founder of the New Concorde — yours truly — will give Boeing a share of the VISION for the New SuperSonic plane, the NEW CONCORDE.
That VISION is what is needed because it represents a giant boost towards finding the True North and a functioning Compass for Boeing company’s rudderless ship that is adrift, in the negative realm of the world, gliding into oblivion as it goes quietly into the long night.
Boeing needs the benefit of a renewed Vision, and that is what the New Concorde represents.
Believe me that is all it takes some times. A simple pill…
VISION.
Strategic and rewarding vision.
And that just might be the perfect “cure” that the good Doctor; Dr Churchill, has prescribed, in order to cure all of the Boeing company’s sickness, malaise, and her abundant “blues…”
“Blues” that just might kill the company, as they have killed her culture already.