Q3 2024 Summary
Published Jan 6, 2025, 8:15 PM UTC- Boeing has a strong backlog and significant demand for its products, providing long-term growth opportunities.
- Management is focused on improving operational efficiency and ramping up 737 production to 38 per month, aiming to return to normal production rates by the end of next year.
- The company is proactively managing its balance sheet to maintain its investment-grade credit rating, with plans to raise capital, reduce debt, and streamline operations, including potential divestitures.
- Persistent execution issues in the Defense segment have led to significant charges and indicate ongoing estimating and management problems, which will take time to resolve.
- The company is considering a capital raise, potentially issuing equity or equity-linked securities, to manage the balance sheet and maintain its investment-grade credit rating, which could dilute existing shareholders.
- Planned workforce reductions and potential divestitures to streamline operations may impact morale and signal deeper operational challenges within the company.
-
Negative Free Cash Flow in 2025
Q: Do you expect negative free cash flow for full year 2025?
A: Yes, we anticipate negative free cash flow in 2025, though it will be significantly better than 2024. The first half will use cash, but we expect to turn positive in the second half as production stabilizes. -
Capital Raise and Balance Sheet Plan
Q: What's your plan for a potential capital raise and balance sheet?
A: We have a plan to address the balance sheet and are actively engaging with rating agencies. We're prepared to raise capital when the timing is right, aiming to maintain $10 billion of cash plus revolver capacity. This ensures sufficient liquidity as we execute our recovery plan while protecting our investment-grade rating. -
737 MAX Production Rate Recovery
Q: How long to regain 737 MAX production rates post-strike?
A: It will take a couple of weeks to bring team members back, including recertification and retraining. Supply chain challenges may cause a bumpy return, but we're prioritizing doing it right over fast. We need to meet FAA metrics before increasing rates beyond 38 per month, making the first rate increase critical. -
Defense Business Challenges
Q: What's causing persistent charges in the defense segment?
A: We have tough contracts, but we need better discipline on what we can control. Our EAC process and risk management must improve to prevent overruns. We're focusing on deeper program reviews and working closely with customers to derisk programs. -
Portfolio Review and Potential Divestitures
Q: Will you consider divesting non-core assets like Jeppesen?
A: We're evaluating our portfolio to decide what fits our long-term strategy. While not specifically commenting on Jeppesen, some assets might be better off elsewhere. We aim to declutter and focus resources on what will make a difference going forward , expecting to have a clearer picture internally by the end of the year. -
Workforce Reduction and Cultural Change
Q: How will headcount reduction impact cultural change?
A: We're focusing on streamlining overhead to become more efficient without affecting production or engineering. Cultural change starts at the top and involves reevaluating our values. We'll supplement the team with external resources if needed, but aim to turn the culture around with our existing employees. -
Acquisition of Spirit AeroSystems
Q: What's the status of the Spirit acquisition and integration?
A: There's no change in our commitment to acquire Spirit and integrate them. The deal will close sometime next year, and we're working closely to improve their performance. We've made good progress in fixing defects and expect further improvements post-integration. -
Supply Chain Management Post-Strike
Q: How are you managing the supply chain during the strike?
A: We're working with every supplier individually based on their situation. In some cases, we've kept suppliers active to mitigate risks. We expect to manage the return without major issues, as the strike wasn't prolonged enough to cause significant disruptions. -
Long-Term Vision for Boeing
Q: Where do you see Boeing in five years?
A: We aim to be the leader in aerospace and defense, setting the standard for our products. With a strong backlog and product demand, if we're efficient, the sky is the limit. -
Exiting Unprofitable Programs
Q: Will you exit unprofitable contracts or programs?
A: For major defense programs, we can't walk away due to commitments to core customers. Instead, we'll work with customers to find win-win solutions and focus on balancing our portfolio with less risky, more profitable programs. -
Hiring External Leadership for BDS
Q: Will you hire externally to lead BDS?
A: We'll consider both internal and external candidates as needed. If we need additional skills from outside, we're open to that. -
Free Cash Flow Usage in Q4
Q: What should we expect for free cash flow in Q4?
A: Free cash flow in Q4 could look similar to Q2, depending on factors like return-to-work timing and production ramp pace. Working capital drag may be similar to the first half as deliveries shift and inventory builds. -
Global Services Outlook
Q: What's your outlook for Global Services?
A: Global Services is doing really well, and we support them to continue delivering results. Cultural aspects from our strategy flow through Global Services as well. -
Portfolio Simplification
Q: How significant is portfolio shaping in your turnaround?
A: We're evaluating the portfolio to focus on doing less but better. While core commercial airplanes and defense systems will stay, some fringe areas may need streamlining. The process is underway, but there's no specific list yet.