Boeing Inc.’s (BA) stock is taking a nosedive on Wednesday, fueled by mounting concerns about a potential credit downgrade to junk status. The looming threat comes from credit rating agencies S&P Global and Moody’s, who are citing the ongoing strike by Boeing’s machinist union and the company’s complex financial situation.
The strike, now in its fourth week, has brought production to a standstill at Boeing’s Pacific Northwest facilities. This halt in operations is disrupting production schedules and putting significant strain on the company’s finances. The financial impact is substantial, with the strike estimated to cost Boeing over $1 billion per month, potentially reaching $10 billion in 2024. This figure includes the strike-related expenses and Boeing’s plans to overhaul its manufacturing processes.
The strike is jeopardizing Boeing’s goal of boosting production of its 737 Max to 38 planes per month by the end of 2024. Despite multiple rounds of federal mediation, negotiations have stalled, leading Boeing to withdraw its latest offer to the union, which included enhanced wages and retirement benefits.
Adding to the company’s woes, the U.S. Federal Aviation Administration (FAA) recently issued a warning about a potential rudder system malfunction in Boeing 737 planes. The FAA alert states that faulty parts could lead to jamming in the rudder system. This safety concern is particularly sensitive given Boeing’s history of 737 Max incidents. The National Transportation Safety Board (NTSB) has also urged Boeing and the FAA to take immediate action to address the rudder issue.
Boeing’s stock has taken a significant hit over the past year, dropping by 38.57% year-to-date. While some major investment firms, like Goldman Sachs and Jefferies, maintain buy ratings on the stock with price targets ranging from $195 to $240, others, such as Wells Fargo, are more cautious, issuing an underweight rating with a price target of $110.
At the time of writing, Boeing shares were down 2.73% at $150.41, according to Benzinga Pro. These recent developments highlight the challenges Boeing faces as it navigates a turbulent period, marked by both labor unrest and safety concerns.
