In notably conciliatory public remarks Friday morning, Boeing Chief Financial Officer Brian West said the company’s senior leadership wants “to get back to the table and to hammer out a deal” with the Machinists union, which went on strike Friday. New CEO Kelly Ortberg is personally engaged in the effort to do so.

“We want to reach an agreement that’s good for our people, their families, our community,” West said. “Our intent is to do just that.”

In detailed comments about Boeing’s financial state at a previously scheduled Morgan Stanley investor conference in California, West also laid out additional serious challenges from supply chain shortages as well as large losses on defense and space programs.

Still, the impact of the Machinist strike was the hot topic he had to address.

On Sunday, Boeing executives agreed a tentative deal with the Machinists union leadership and thought a strike had been averted.

But West said even before Thursday night’s strike vote overwhelmingly rejected the deal, the company realized there was a “disconnect” as 30,000 rank-and-file union members vented their displeasure at the terms of the deal throughout the week.

It became “loud and clear with our union members that that offer didn’t meet the mark,” he said.

In Thursday’s vote, 96% opted to strike.

The chief concern Machinists expressed about the offer was that the wage increase, which Boeing presented as a 25% raise over four years, was substantially offset by the elimination of the union’s annual bonus and fell well short of what was hoped for.

CEO Ortberg is “already at work to get an agreement that meets and addresses their concerns,” West said.

“Kelly is personally engaged and focused on restoring our trust with our people and the union,” he said. “That’s a priority, resetting that relationship.”

He noted that since taking over as CEO just a month ago, Ortberg has focused on getting close to the workers producing the airplanes and that, just this week, Ortberg bought a house in Seattle.

Ortberg’s “priorities are to reset, re-engage and rebuild,” West said. “How that plays out in terms of timetable, that will be up to the union, the bargaining table participants to decide.”

West said the financial impact of the strike, which immediately paralyzed production at all the Puget Sound-area commercial airplane assembly plants, will be “dictated by the duration of the work stoppage,” which is unpredictable.

“The strike will impact production and deliveries and operations and will jeopardize our recovery,” he conceded.

In August, only 17 of Boeing’s 737 Maxes were delivered off the assembly line while another 15 Maxes were delivered from the stored inventory of airplanes previously grounded, leaving about 70 of those stored jets still to be reworked and delivered.

Both new production and rework of stored Maxes will now stop.

West said the Renton plant had been building up “very good momentum” ramping up 737 Max production toward the current cap on the rate imposed by the Federal Aviation Administration of 38 jets per month by year-end.

That target is now doubtful.

“That rate is so dependent upon the duration of the strike,” West said.

Supply chain problems also

Aside from the strike, West noted that Boeing has been suffering severe supply chain problems that have already reduced widebody jet deliveries.

He said the 777 jet program in Everett has been hit by shortages of GE-90 engines.

And 787 deliveries out of North Charleston, S.C., have been “acutely impacted” by shortages of seats, both from reduced supply by seat makers and slow certification of new business-class seats that have complex technology.

While 787 production in nonunion South Carolina is not affected by the strike, rework in Everett on the fuselage gaps on previously built 787s stored there will be halted.

Those two factors mean 787 deliveries will be below five per month for the immediate future, West said.

He said Boeing is communicating how suppliers will need to adapt to the strike on a case-by-case basis.

If suppliers to the Puget Sound area assembly plants are behind schedule, Boeing will encourage them to catch up and continue sending parts to Boeing to build a buffer supply.

But if not behind, the instruction will be to stop production, “don’t deliver any more,” West said.

“We haven’t ramped up quite as we have expected, and now we’ve got further pressure from a work stoppage in near term,” he summed up.

Big defense division problems too

The last dose of bad news West delivered to investors is that Boeing’s defense division is still bleeding cash.

He said the third quarter will see losses in Boeing’s Defense and Space unit similar to the second quarter, when the division reported a loss of $900 million.

He said development costs of the T-7 jet fighter trainer and the MQ-25 aerial refueling drone are climbing.

And even Boeing’s aging F-15 and F/A-18 jet fighter programs in St. Louis are losing money.

“We’re seeing higher disruption … as we ramp the F-15 up and as we wind the F/A-18 down,” West said. “It’s more challenging than we expected, and it’s creating cost pressures.”

In addition, the strike will hit deliveries of 767 airframes to Boeing’s military side for the U.S. Air Force KC-46 aerial refueling tanker.

As for Boeing’s troubled space program, West said the Starliner program will take charge for the recent failed mission to the International Space System.

And he made clear that Boeing has some difficult decisions to make about a program that has no clear path to recovering its costs.

“There’s important work to determine any next steps for the Starliner program, and we’ll evaluate that,” West said.

Indeed, with the strike now closing off much of Boeing’s cash flow, West said the company leadership is immediately “laserlike focused on action to conserve cash.”

One imperative is to preserve Boeing’s investment-grade credit rating.

That currently stands just one rung above “junk” status, indicating a high-risk investment. And on Friday, credit rating agency Moody’s placed that rating “on review for downgrade.”

Boeing’s credit rating “could be downgraded if the IAM strike is prolonged, leading to material reduction in Boeing’s liquidity,” said a note from Moody’s.

Boeing has about $12 billion of debt coming due for repayment between now and the end of 2026.

West said that, if necessary “to ensure that we can satisfy our debt maturities over the next 18 months,” Boeing will raise more capital through taking on more debt or sales of equity.

However, the Moody’s note said Boeing’s credit “could also be downgraded if Boeing needs to issue debt alongside any equity raised to meet its liquidity requirements.”

West said Boeing will balance raising capital with keeping confidence in its credit.

Asked to predict what the year’s net cash flow will be, West replied that “that is a very difficult question to answer” because of the uncertainty created by the strike.

©2024 The Seattle Times. Visit seattletimes.com. Distributed by Tribune Content Agency, LLC.