Boeing CEO Aims to Restore Greatness Amid Labor Strikes

Challenges Facing the Aerospace Giant

Boeing’s new CEO, **Kelly Ortberg**, has set his sights on making the aerospace and defense giant “great again.” His remarks have resonated with Wall Street, but the ongoing labor strife presents significant hurdles to achieving that goal. Recently, Boeing’s shares (BA) took a 2% hit following the rejection of a new contract offer by factory workers in Washington State, which subsequently extended a strike that has now persisted for six weeks.

During a conference call with investors, Ortberg acknowledged the arduous journey ahead, stating, “There’s a lot of work to do, we have a plan, and change is already underway. This is a big ship that’ll take some time to turn. But when it does, it has the capacity to be great again.” However, analysts believe that the key to Boeing’s resurgence lies in negotiating a deal with its labor force.

The Importance of Labor Relations

In a recent note, BofA Securities analyst **Ron Epstein** emphasized that reaching a labor agreement is “arguably the most critical step” for the company, as the rejection of the latest offer introduces “further uncertainty, costs, and recovery delays” during an already extended strike. With the strike approaching its 40th day, the urgency for a resolution is palpable.

Similarly, **Gavin Parsons** from UBS reiterated that an agreement with the striking machinists is paramount for both Boeing and its suppliers. He noted that provided there remained robust demand for new aircraft, once the immediate issues are addressed, the market would likely reevaluate Boeing’s long-term earnings potential in relation to its rival, Airbus SE.

Boeing has reported an order backlog exceeding **$500 billion**, which Ortberg described as a customer base “that wants us and needs us to succeed.” However, analysts remain cautious. **Ken Herbert** from RBC Capital Markets commented that the union’s rejection of the proposal was surprising, given that it included substantial wage increases and bonuses. While it did not address pension reinstatement—an apparent sticking point—Herbert noted that the company might still negotiate successfully without a pension plan.

Ongoing Uncertainty and Strategic Moves

The timeline for continued negotiations remains unclear, heightening the tension between Boeing and its labor force. Herbert pointed out that the union is likely aware of its negotiating leverage, putting pressure on Boeing as time progresses. He speculated that the wage increases might need to go up to around 40% over four years to reach a resolution.

In light of these challenges, Boeing has been taking proactive steps to shore up its financial standing. Last week, the company filed a **$25 billion** shelf registration with the U.S. Securities and Exchange Commission to raise funds through equity or debt over the next three years. Additionally, Boeing has entered a new credit agreement with lenders and is expected to tap into capital markets, likely issuing at least **$10 billion** in equity securities soon. These measures aim to preserve its investment-grade debt status and strengthen its balance sheet.

Outlook and Future Prospects

Barclays analyst **David Strauss** highlighted Ortberg’s “pragmatic approach,” suggesting it could lead to a “slightly larger than expected equity raise.” In these uncertain times, he emphasized that a more substantial financial maneuver might be beneficial as the company navigates its challenges.

While the road ahead for Boeing is fraught with obstacles, including pressing labor issues and the imperative to stabilize its finances, there exists a sense of cautious optimism among analysts. As Ortberg pushes for a return to greatness, the efficacy of his strategies and decisions in the coming months will be crucial for restoring confidence in both the company and its stock.

In summary, as labor negotiations unfold and Boeing seeks to secure necessary funding, the company’s path to recovery could set the stage for a reinvigorated presence in the aerospace market. The coming weeks will reveal whether Boeing can overcome these challenges and realize its aspirations of greatness.