Boeing is in no position to dictate terms of assistance.
If they don’t want the government to take an equity position, then they can do a corporate bond issue to raise cash. They will discover that only junk bond traders and hedge funds will touch them - and only at interest rates that would shock a loan shark.
My experience has been that when one asks for the use of other people’s money, there are always strings attached. I’m assuming that when Boeing borrows money from a bank or floats a bond issue in the market, they have to agree to certain conditions such as “you have to pay the money back with interest”.
If Boeing doesn’t want to give an equity position to the taxpayers in exchange for their money, then that is their privilege to do so. The taxpayers are under no obligation to provide them that money without some guarantee of return; providing a “grant” under said circumstances (no equity for the funding source) is simply socializing the cost while privatizing the profit.
“If they attach too many things to it, of course you take a different course,”
“I can only comment on what Boeing has said publicly, which is Boeing has said they have no intention of using the programs. That may change in the future,”
Boeing got the right man for the job at the right time. Dave is a master of saying “basically yes, but generally no”. He is equally adept at sticking his finger in the air to measure the strength of political winds and direction they happening to be blowing. And finally, he does not care how ridiculous he looks. This is part of his job description and responsibilities as the new CEO to take Boeing through the MCAS debacle and now Covid-19 crisis. If there is anyone who will not let a crisis go to waste it is “Boeing Dave.”
Meanwhile, back at the ranch:
“working together to take swift bipartisan action to support the American economy, including the 2.5 million jobs and 17,000 suppliers that Boeing, the aerospace industry and the U.S. rely on to maintain our world leadership in commercial, defense and services. Boeing’s top priority is to protect our workforce and support our extensive supply chain, and the CARES Act will help provide adequate measures to help address the pandemic.”
Translation: If there is money with no strings, we, Boeing are in. Boeing believes it is too big to fail. So, we are counting on you " Daddy Federal Government" to take care of your prodigal child. Because our first priority is to protect our shareholders, ahem…excuse me…( Dave’s singular finger goes in the air for a political wind check, guess at which one it is)…protect our workforce and support our extensive supply chain with “Daddy’s” money. Let me know when the check is in the mail. ( Boeing Dave now smiles for the obligatory photo op)
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Time for “too big to fail” to fail.
I think Boeing have no right to challenge what the government want in return for bailing tham out of a situation ENTIRELY of their own doing. Absolutely NOTHING to do with COVID-19 at all!!!
It’s not the tax payer handing Boeing the money, it’s a bunch of Washington bureaucrats handing out money that is not theirs. Boeing would not be beholden to the tax payer, Boeing would be indebted to Washington bureaucrats. The only one this deal is good for is Washington bureaucrats and Boeing top management.
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Okay folks, calm down. Boeing has a choice, take Washington’s money and cough up equity, or don’t. That’s their problem.
What is far more concerning is the fuel leak issue and the other quality-control problems they are having with the KC-46. Yes, the -46 is a kind of “Franken-Tanker” but it is basically a 767 at heart. There can’t be that much new tech in a 767 that fuel leaks would be an issue. The issue has to be with quality of the work. Boeing has been having tons of quality control issues on the 46 and it doesn’t seem to be abating. Quality control is one of the first issues when you start getting “money people” running the show and not operators / engineers. Money people focus on stock price to the total disregard of all else. There is no denying that. Hurry, hurry, hurry… get more out the door with the least amount of cost possible… even if it takes endless shortcuts to do it, don’t worry about that little smudge, it’ll buff out later. See how good we are doing there Mr Stock Buyer? We are doing the work of at least 10 people with only 4! Aren’t we just wonderful? Buy, buy, buy our stock so the price goes up and my next bonus is assured.
A little jaded sounding, yeah, probably, but still pretty much a fact. I flew classic 74 freighters for 16 years and loved them. They were solid and mechanically dependable, at least as far as the basic machine was concerned. No fuel leaks, no basis systems that wouldn’t work right, no debris in the fuel tanks, etc, etc. Boeing has sadly gone from a dependable engineering company to a Wall Street run debacle and joke.
David Calhoun knows Boeing does not need the CARES ACT because Boeing will rely on the Federal Reserve to do its dirty work.
What is of real concern here is the $4.3 Trillion - in addition to the $2 Trillion CARES ACT -represented by the doubling of the Federal Reserve balance sheet, for the Fed to buy treasuries, Corporate bonds and old bicycles - pretty much anything investors and corporates want to sell - in order to prop up the fantasyland of good health in Corporate America, as we progress through this crisis.
The tragedy here is that most Americans will not see, this Great American Corporate Socialism Theft taking place right under their noses until it is history.
Having gutted Boeing’s balance sheet buying $45 billion of Boeing shares in recent years at circa $350/share, funded by borrowings in order to prop up earnings, dividends and C suite bonuses, Boeing is now looking for the Fed to park $60 billion back into Boeing at mates rates -nil cost, so that they do exactly the same thing again over the next 10 years.
it is time for the US to stand up to these financial thugs and call time.
It’s Boeing’s option to accept the terms or reject them. Many years ago I opted to pass on a Small Business Administration loan because I didn’t like the terms re: equity. My aviation business could have grown much larger in a very short time but I chose a self-funded, slow growth. I don’t regret it. The concept of government equity in exchange for government funding has been around at least as long as the SBA and student loans. It works for some (GM) and not for others (Boeing).
“The concept of government equity in exchange for government funding has been around at least as long as the SBA and student loans. It works for some (GM) and not for others (Boeing).”
And that’s the bottom line. It’s unclear why so many seem to be insisting that Boeing should be required to take a loan on terms they find not right for them. It’s up to the business whether or not they want to take money as offered. Ford made the same sort of decision.
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Winner of the daily Intelligence Award.
I certainly agree David.
I grew up in Detroit and am old enough to recall a similar scenario unfolding in the auto industry during the 1970s. Quality, workmanship, reliability went into free fall. Then came an unforeseen crisis (congress refused to extend emissions compliance deadlines) and the unprepared auto industry was overwhelmed by better products from Asia and Europe - never to recover their market share or valuations.
Well done Jim, brilliant.
The problem is Boeing desperately needs the cash, to pay salaries and wages, and the cost of the 737 debacle, but cannot afford/is plain unable, to borrow it on normal commercial terms. With equity being near worthless, an equity issue would dilute existing shareholders out of existence.
So how to pay wages and salaries, and ensure security of all those wonderful employees whose livelihoods are now threatened, just because Boeing did not conserve cash when times were good?
In truly free enterprise, American world, anyone putting cash into the troubled , cash strapped can of worms that is Boeing now, would require a very high tariff. Taxpayer investors via the Fed Reserve or US Govt should expect no less. If we are playing true capitalism, existing shareholders in Boeing should get wiped out.
This article by Jesse Felder explains the financial engineering that hollowed out Boeing’s (and McDonald’s, Caterpillar, and 3M) balance sheets and cash positions over the past 5 years, and how it was driven by “stock based compensation”.
From the article:
"On average, these companies each spent $200 million per year on issuance of options to top management. Those very same managers were the ones who decided it was a good idea to leverage the balance sheet to buy back stock. At the very same time, they also decided it wasn’t a good time to be a holder of those shares and so they sold, collectively, over half a billion dollars worth of their own shares in the open market. As I wrote about year ago, “If This Isn’t Stock Manipulation, I Don’t Know What Is.” "
The equity holders of these companies should not now be bailed out by the US taxpayer, either via the Fed Reserve, or the CARES Act, or any other means.
“If we are playing true capitalism, existing shareholders in Boeing should get wiped out.”
There’s a mechanism for that. It’s called bankruptcy. If that becomes attractive enough, Boeing will pursue it.
But be careful what you ask for. A LOT of stakeholders would be left holding bags, including the USAF.
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And, Tom C., we in return “steal” public roads, fire and police service, public airports, etc. It’s called a taxation system, necessary for an advanced society. It’s the price we pay to live in a free and decent society.
It takes a harsh and cruel drought
To sort the weaker saplings out
They make room for stronger trees
Maybe that’s what life’s about
Well silly me. Here all along I thought you were concerned about the USAF being among the bag holders. You wouldn’t be parsing words and phrases here would you? But I’ll oblige you in your serious question. Let’s start somewhere sometime with some bad, too big to fail behaver. What a great opportunity this moment might be presenting to us. Tim Cook or Dave Calhoun?
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Well, there’s a Sophie’s Choice.
Apple’s customers generally are proud members of a cult. They often have more money than brains. Thus, much of Cook’s success.
Has Calhoun ever designed an airplane?
I would say this: don’t hire a bean-counter to run a technology company.
Question: can a competent CFO keep competent engineers from spending a company into oblivion?
General Dynamics seems like a better fit than Apple. But I don’t work on Wall Street…
Yeah, Boeing’s to big to fail…
The future has caught up with Dave Calhoun, the bean counter from Chicago, who is as responsible as any Boeing Director over the last 5-7 years for the demise of Boeing.
Having juiced the stock price to $350 and blowing $45bn on buybacks at that price, David Calhoun now is looking at a shareprice of $150 and a loss to Boeing of approx $25bn on those stock purchases.
But no worries, he and his pals have taken off with the cash, leaving Boeing with cap in hand desperately trying to borrow cash at any price, and 400 737s designed by bean counters which are inherently unstable and too dangerous to fly in.
There lies the remains of a great company. Maybe it can be great again, but those recent Directors and ex CEO Denis Dennis Muilenburg have done Boeing a generational disservice.
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“…a loss to Boeing of approx $25bn on those stock purchases. But no worries, he and his pals have taken off with the cash…”
Okay, Andy. Let’s play “forensic accounting.” What evidence can you find that Dave Calhoun and/or any of his “pals” have absconded with $25 billion in cash? Your comment is both irresponsible and slanderous. Shame on you.
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Well, I’m not sure if Andy’s numbers are exactly correct, but I wholeheartedly agree with the gist of his comment. Sadly, Mr. Calhoun has been acting like most CEO’s of large US corporations, and has concerned himself with nothing else aside form increasing the company’s stock prices - and little else. Everything else is expendable as long as he is providing returns to himself and all of the other major stock holders. And the frustrating part is that they can ruin a company like Boeing, and walk away with their golden parachutes while the average worker - well, you know how that story ends. 
He’s clearly NOT saying they took off with $25B in cash. He’s saying they used financial tricks to boost their own short term positions and hollowed out the company in the process, something that is both scientifically true and pretty common in whatever remains of US industry at this point. Shame on you for overreacting to his reasonable comment.
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Direct quotation:
“He and his pals have taken off with the cash.”
What he ACTUALLY said is quite clear to anyone who can read.
YARS is right about what the wording tries to say. In “He and his pals have taken off with the cash.”, the word “the” was a poor choice. Grammatically, the word “the” refers to something in the previous paragraph, most reasonably “approx $25bn on those stock purchases”. But the “approx $25bn” is a loss, not a pile of cash available for taking off with. So, the word “the” is a reference without a target. It makes @AndyM’s meaning muddy. If @AndyM had said “their” instead, the wording would have been safer from the nitpickers. At least that is this software engineer’s view. Maybe an editor would have a more authoritative evaluation.
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Exactly. Since there never was a $25 billion pile of cash, NO ONE could have “taken off with it.” Thus my challenge to conduct some forensic accounting.
IMWO, condemning slander does not comprise picking nits. Andy’s comments are beyond the pale.
It’s was the Jack Welch crony, Muilenburg, who leverage up the company, and left it just as insolvent as GE… Destroying another Great American company with cheap money printed from the Fed…