24/7 Wall St. Insights
- A worker strike is costing Boeing Co. (NYSE: BA) $1 billion per month.
- That and other problems have driven its stock down sharply this year.
- Also: Dividend legends to hold forever.
Boeing Co. (NYSE: BA) has legal and labor problems. It pleaded guilty to fraud in a case involving fatalities on two 737 Max airplanes, which cost the company $245 million in a fine. The company paid additional sums to families and carriers. The case was settled in July. Earlier this year, the National Transportation Safety Board started investigating Boeing after a door plug blew off a 737 Max 9 during an Alaska Airlines flight in January 2024. One issue raised was whether the company needed more quality control when it assembled the plane.
The more recent Boeing problem could be just as serious. Approximately 33,000 members of the International Association of Machinists are on strike. Without these workers, Boeing could not have assembled planes.
Boeing’s offer to the union is for a 25% raise spread over four years. The union wants a 12% raise immediately and an additional four-year raise that would total 30%. Management’s case to the workers is that it cannot be profitable under the deal they are pressing.
The strike is costly. According to CNN, Standard & Poor’s analysts put its monthly cost at $1 billion. Boeing lost over $1 billion in its most recently reported quarter.
Boeing’s Future
This series of problems has already driven Boeing’s stock down 40% this year, while the market is 20% higher based on the S&P 500. It is hard to imagine a recovery of the shares in a company that cannot operate one of its major divisions. The company is lucky to have large operations in defense and space services. The commercial aircraft business contributed just over $10 billion to Boeing’s $33 billion in the most recent quarter. Defense was $13 billion, and Services contributed another $10 billion.
There is no chance the strike will be settled soon. Boeing’s future relies largely on a resolution.
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