Boeing’s negotiations with its largest union have collapsed for the third time, extending a strike that has already lasted nearly a month. The aerospace giant recently withdrew its pay proposal for around 33,000 American factory workers, which has perpetuated ongoing work stoppages. According to S&P Global, despite Boeing’s efforts to cut costs, such as implementing unpaid leave, the strike is costing the company over $1 billion each month. Consequently, Boeing’s credit rating is now under negative watch, with the risk of being downgraded to junk status looming.
Since the strike began on September 13, members of IAM District 751 have been embroiled in a dispute over wages and retirement benefits. In an effort to resolve the conflict, federal mediators stepped in, prompting renewed negotiations on October 7 and 8. Although Boeing proposed a 30% salary increase along with improved retirement benefits, those discussions ultimately fell apart, and no new talks are scheduled in the immediate future.
Boeing has expressed that retracting its pay proposal renders further negotiations impractical, citing the need to conserve cash during this challenging time.
However, the ongoing strike is creating considerable operational challenges for Boeing. On October 8, S&P Global pointed out that the company’s recovery is in jeopardy due to the strike, emphasizing that Boeing may struggle to achieve its target of producing 38 MAX aircraft per month by year-end. This situation is compounded by the potential for a downgrade, aligning with similar assessments from Fitch and Moody’s.
Presently, the three major credit rating agencies have Boeing rated at the lowest level of investment grade. A downgrade could push the company into junk status, leading to higher borrowing costs and potentially driving away funds that steer clear of speculative-grade assets. As Moody’s notes, Boeing is facing $4 billion in debt maturing next year and an additional $8 billion the following year.
