Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing 3Q deliveries up despite strike October 8, 2024
- Strike slows Boeing’s march toward improving safety culture October 7, 2024
- Aerospace supply chain still ailing; Sustainable Aviation Fuel isn’t the answer to go green October 4, 2024
- Bjorn’s Corner: New engine development. Part 27. Long developments October 4, 2024
- Longshoreman strike adds to Airbus, Boeing woes October 1, 2024
Longshoreman strike adds to Airbus, Boeing woes
Update, Oct. 3: The Longshoreman’s union and the employers agreed to a 62% pay hike over six years. The strike has been called off.
By Scott Hamilton
Oct. 1, 2024, © Leeham News: As if the aviation industry supply chain isn’t causing enough heartburn to Airbus and Boeing, a new US dockworkers strike today will interrupt shipping to Charleston (SC) and Mobile (AL).
Charleston is where Boeing assembles the 787. Mobile is where Airbus assembles the A320/321. It’s also where there is an assembly line for the A220.
“We are aware of the situation and have taken actions to mitigate the potential impact on our operations in Mobile,” an Airbus spokeswoman said, without providing details. Fuselage sections and wings for the A320s are shipped to Mobile. It’s unclear whether any sub-systems for the A220 are affected; most components are trucked in, but not all.
Boeing’s 787 line largely relies on airlifted components via Boeing’s in-house Dreamlifter program. But some components are shipped. The 787 line currently is the only assembly facility remaining open during a separate contract dispute strike by the International Association of Machinists and Aerospace Workers. This strike, now in its third week, shut down all Boeing aircraft assembly in the greater Seattle area. Boeing doesn’t “currently” expect and impact.
Dockworkers strike
The dockworkers’ strike, by the International Longshoreman’s Association, affects seaports up and down the US East Coast and in the Gulf of Mexico. The union wants a 77% wage increase over four years, among other asks. The companies offered a 50% wage increase.
Boeing’s union wants a 40% wage increase; the company offered 30%. But the impasses are over the union demand that Boeing reinstate a defined benefit pension plan (DBPP) given up in 2014 when Boeing pressured the union for concessions in exchange for locating the 777X assembly site in Everett (WA). Boeing refuses to consider reinstating the DBPP.
The Longshoreman’s strike, as with the one at Boeing, comes at an awkward time. The US presidential election is in its final weeks. A lengthy strike by the Longshoreman will impact imports and if lengthy, could affect consumer goods access and pricing even as voters are going to the polls.
President Biden, a strong pro-union president, faces a conundrum: seek to force the Longshoreman back to work to appease consumers, alienating the critical labor vote needed for Vice President Harris’ election to defeat Donald Trump. Or let the strike continue and risk seeing product shortages and price hikes.
Boeing strike
As for the Boeing strike, the impact on consumers is less visible. The longer strikers remain on the picket lines, the more belt-tightening the workers are compelled to do. This affects consumer spending.
But the longer the strike goes on, the more precarious Boeing’s financial position becomes. Before the 2018-19 737 MAX crisis began, followed by successive related and unrelated safety and production upheavals, Boeing was the USA’s largest exporter—an important element in the global balance of trade.
Boeing is also a top defense contractor. Deliveries of the P8 Poseidon and KC-46A tanker, based on commercial products, are suspended. Boeing’s financial condition, impacted by the strike at Boeing Commercial Airplanes, will have a negative halo effect on Defense programs.
As with the Longshoreman’s strike, Biden faces the choice of a potential impact on national defense and export sales or potentially alienating unions if the Administration intervenes.
It’ll be interesting to see if there is any action from the Presidential administration re the strikes.
I’m expecting a minimum of boat-rocking in the run-up to the election…on all sorts of fronts…
That ship has sailed into extremely choppy water.
So, production at Charleston is now also stalling.
$100M per day cashburn just became $150M, I suspect.
Perhaps related: BA is considering doing a $10B equity raise…maybe in about a month’ s time…
Bloomberg:
“Boeing Co. is considering raising at least $10 billion by selling new stock, as the planemaker seeks to replenish cash reserves depleted further by an ongoing strike […]
“Raising equity isn’t likely to happen for at least a month, assuming the planemaker can resolve the strike, because Boeing wants a firm grasp of the financial toll from the walkout by 33,000 workers, the people said. […]
“Analysts expect Boeing to suffer a $3.36 billion cash outflow in the third quarter, according to data compiled by Bloomberg. The strike stands to cost the company about $1.5 billion for each month that workers stay off the job, according to estimates by JPMorgan Chase & Co. […]
https://www.bnnbloomberg.ca/investing/2024/10/01/boeing-weighs-raising-at-least-10-billion-selling-stock/
At least the stonk went up!
Sounds optimistic.
Where BA is concerned, there’s always a downside surprise 🙈
$10-12 billion won’t last long…
Reuters:
“Boeing has just under $4.6 billion in bonds and loans coming due by end of 2025, according to data compiled by LSEG.”
https://finance.yahoo.com/news/boeing-weighs-raising-least-10-102812371.html
@Abalone
The loss of 3 B787 deliveries per month is not what is killing Boeing. It’s the loss of literally everything else that they make.
As to equity raise…they are going to have to settle the strike first. Pretty hard to sell stock right into the middle of a strike.
Having a completely idle FAL in Charleston will incur significant costs…apart altogether from the revenue loss.
raising equity to burn on the pyre of “interest servicing and day to day wear and tear” can not provide any productive outcome.
What would be the impact on share value when release those bought back shares from deep freeze?
escalator to earth center hell?
Ai might be missing something here, but why is production stalling at Charleston? They arent striking
From the LNA article above:
“…a new US dockworkers strike today will interrupt shipping to Charleston (SC) and Mobile (AL).”
“Boeing’s 787 line largely relies on airlifted components via Boeing’s in-house Dreamlifter program. But some components are shipped. “
Another dent in BA’s reputation:
“Over 40 Airlines Could Be Flying Boeing Jets With Risky Rudder Parts.
More than 353 incorrectly assembled actuators have been installed on Boeing 737 planes since 2017”
“The National Transportation Safety Board warned over 40 foreign airlines on Tuesday that their Boeing 737 planes may be fitted with potentially dangerous rudder components. The agency identified 271 parts that could fail and jam the rudder control system. The NTSB discovered the issue while investigating a February landing incident involving a United Airlines flight arriving at Newark Liberty International Airport.”
https://jalopnik.com/over-40-airlines-could-be-flying-boeing-jets-with-risky-1851661895
—
If there weren’t a strike on the 737 line, BA could use the longshoremen strike as an opportunity to try to get QC processes in order.
Ah well.
@Scott
This is *not* a discussion about politics.
“President Biden, a strong pro-union president, faces a conundrum: seek to force the Longshoreman back to work to appease consumers, alienating the critical labor vote needed for Vice President Harris’ election to defeat Donald Trump.”
Watch the video below
https://x.com/ForecasterEnten/status/1840775213274763665
IIRC Teamsters refuses to endorse Harris because their members are going (may be overwhelmingly) to vote for DJT.
@Pedro: The national Teamsters won’t endorse either candidate. Several state Teamster units endorsed Harris.
Biden has said several times that he will not invoke Taft-Hartley because he supports the union’s position, both before and after the start of the strike.
meanwhile the union president is making PR appearances with Trump (who that same day gave a speech advocating hiring scabs)
Not that I like the NY Post, but take a look at this about the Longshoreman’s president. https://nypost.com/2024/10/02/business/harold-daggetts-sprawling-nj-mansion-has-bentley-5-car-garage-and-guest-house/
Pay the workers in equity bonuses make them investors, owners of the company they work for.
Yeah, this is going to be a while
https://www.youtube.com/watch?v=822WNvhQHKI
This guy is entertaining. Will not on the White House’s Christmas list. Go ahead and use the Taft Hartley on them, they are expecting it. Pretty savvy guy.
At least he gives interviews – which is more than we can say for Ortberg 🙈
Your Boeing stalking is starting to feel uncomfortable.
CBC 737 Rudder issue:
“The NTSB also disclosed on Monday that it has learned two foreign operators suffered similar incidents in 2019 involving rollout guidance actuators.”
https://www.cbc.ca/news/world/ntsb-boeing-737-airplanes-safety-1.7338397
“Foreign” is always a Boing way to distract from the root cause. I remember “foreign” MAX crashes.
+1
It’d be costly to the economy:
J.P. Morgan estimated that a strike that shuts down East and Gulf coast ports could cost the economy $3.8 billion to $4.5 billion per day…
And it will be inflationary — particularly since the US imports more than it exports:
“Port strike could reignite inflation, with larger economic impact dependent on how long it lasts”
https://www.cnbc.com/2024/10/01/port-strike-could-reignite-inflation-with-larger-economic-impact-dependent-on-how-long-it-lasts.html
—
No wonder Jerome Powell warned just a few days ago that the Fed will be lowering rates at a slower pace…
Longshoremen deal with container traffic.
US biggest export 2022 is crude/refined petroleum/gas $350 bill No longshoremen required
Biggest destination is Canada with $308 bill….. a land border
Mexico has a land border too with $300 bill exports
https://oec.world/en/profile/country/usa
Relax if there’s no imported material and components thru’ ports, there’s no (or much lower) export. I heard you can’t export grains from the East coast during the strike.
People are going to empty their bank accounts (max out their cc) & empty the grocer, the pharmacy, & then the liquor store before it’s too late if the strike lasts much longer!
Panic buying amid U.S. ports strike is creating supermarket supply concerns
https://www.cnbc.com/2024/10/03/panic-buying-us-ports-strike-food-supply-concerns.html
“NTSB slams FAA for not taking possible 737 rudder failure more seriously & Boeing for not telling United details of the system
Also, how the faulty component, part of an optional autoland system, ended up on a MAX though United hadn’t ordered that option”
https://x.com/dominicgates/status/1841491760863961381
https://t.co/vi6z4ubmoc
‘“Equally concerning,” Homendy said, is that Boeing didn’t provide detailed information about the component that failed to United Airlines when it delivered the nine affected MAXs to its fleet.
United and its pilots were unaware that this component — an option the airline had not ordered — was nevertheless installed and mechanically connected to the rudder on the tail fin, which is used to steer the jet down the runway on landing.’
“At Boeing, we own safety”
“Most scrutinized plane in history”
“Just ship it”
—
It not just BA’s credit rating that’s hovering around junk level.
Scary that the FAA is still in BA’s pocket.
Cebu Pacific firms order for 70 Airbus A321neo
Boeing’s leadership (if we want to call it that) started the year 1997 with zero debt and over $5 billion with a B in cash. The company self financed all of its big programs with the exception of military dev contracts. As soon as Stonecipher got control and Debbie Hopkins was hired, a program was started to get rid of the cash by doing stock buy-backs to cover ever increasing payouts to the top execs, and to replace the self-financing approach with debt. Hopkins routinely made little speeches internally on the importance of having enough debt on the balance sheet (gee I wish I was making that up, but it’s true).
On top of the the war on top engineering talent to cut internal cash burn (but not costs, there is a HUGE difference that shows up in productivity), they also started selling off any assets they could get away with. So gee, now the company has nothing left to sell that anybody wants (e.g. its ULA stake), and cost have skyrocketed (meaning productivity has tanked).
The problem is not the cost of things like a defined benefit plan for the employees. It is the inability to produce a single product in an efficient and profitable manner, or to execute a single dev program even remotely close to cost and schedule.
What they should do is seize the opportunity in front of them, shut down every assembly line and not start them up again until 100% of the traveled work is done, and then not advance any line in such a way that a single traveler is generated. That would disclose the true production rates, which are probably someplace quite close to the delivery rates, or a bit below them. This would have the added benefit of making all existing production inefficiencies glaringly obvious and easy to see. That way management could actually do something useful, and address their real issues, instead of worrying about making numbers against metrics that have little value, if any over the crew of the Titanic worrying about the deck chair counts.
As for cash needs, perhaps the insanity of Wall Street will consume the reissue of some of the stock they bought back. If that stock does find buyers at any price more than pink sheet offerings, it would have the entertainment value of giving Burton Malkiel a hearty laugh. Otherwise, the mission the board has set for Ortberg, which is to prevent zeroing out the existing shareholders by admitting the obvious (i.e. that the company has been bankrupt for over a decade and the Congress needs to take it over they way they did GM) — that mission needs to be given up as impossible.
It’s sad really, that this country allows large corporations that have become bankrupt to continue to be governed by the representatives of the shareholders whose equity stake in the company is a net negative number. That’s just wrong, and something that needs to be fixed. It stacks what should be the priorities upside down.
Very comprehensive article on CNBC:
“The East and Gulf coast ports strike could be a no-win situation for the Biden administration”
https://www.cnbc.com/2024/10/02/why-ports-strike-could-be-no-win-situation-biden-administration.html
—
Despite the title, I don’t consider this article to be political — the content is essentially restricted to economic and fiscal impact.
Bloomberg: Boeing’s Frail Finances Give Strikers All the Power
https://www.bloomberg.com/opinion/articles/2024-10-03/boeing-s-frail-finances-give-strikers-all-the-power
@Pedro
Not sure how motivated Boeing will be to negotiate if the longshoremen strike meaningfully stops production anyway
I doubt that production in WA would be affected by the port strike on the Gulf/east coasts — WA is on the west coast, and is connected by rail to (landlocked) Wichita.
BA has every reason to negotiate…unless, of course, it’s deliberately setting its sights on Ch. 11.
Stuff like that, yeah.
The “news” takes on quite a different meaning when read in that light (Cf. the various, murky “wars” said to be occurring atm).
😉
@Abalone
Breaking news
Moot point now…looks like the longshoremen strike is settled and they are going back to work tomorrow
The original point isn’t moot.
The ports coughed up 62% in less than a week.
McB refuses to go further than 35% after 3 weeks.
And the average port wage was already better than the average machinist wage.
A little apparent excitement on a Ryanair 737 (MAX-8,
from what I can tell; corrections welcome):
https://www.mensjournal.com/news/boeing-engine-catches-fire-italy
afaics it is the small items that count
not the big stuff like major sections.
auto manufacturers are currently held up because ancillary items are stuck in transit.
( hmm, when I did my thesis at VW Wob all available space was occupied with unfinished Passat cars just because the front turn indicator assembly was not available.
How much is BA/BCA going to offer?
“PORT OPERATORS TO OFFER 62% RAISES TO END DOCKWORKERS’ STRIKE- WSJ
**PORT OPERATORS’ OFFER IS BEING MADE ON THE CONDITION THAT DOCKWORKERS GO BACK TO WORK AND AGREE TO EFFICIENCY GAINS – WSJ”
https://x.com/PiQSuite/status/1841965169158590707
“US port strike ends leaving huge cargo backlog to be cleared”
“-54 container ships queued outside ports, risking shortages.
-Tentative deal includes 62% wage hike over six years-sources
-Strike cost U.S. economy $5 billion/day, JP Morgan analysts say”
https://www.reuters.com/world/us/us-port-strike-ends-clearing-long-ship-queues-will-take-time-2024-10-04/
“backlog”
Queued up ships are a regular feature on the west coast.
Constant over many years. recently improved slightly.
( Mostly caused by undersized harbor infrastructure limiting container ship size )
Sign of the times:
Of the world’s ten busiest container ports, 9 are in Asia — and 7 of those are in China.
Rotterdam (Europe) comes in at position 10.
The highest US entrant on the list (LA) is at position 17.
https://www.worldshipping.org/top-50-ports
Sobering statistics.
A study by UNCTAD measures the time between container moves by countries:
Call size 4001-6000 / > 6000 (TEU) in min.
US 1.9 / 1.2
Netherlands 0.9 / 0.8
UK 1.1 / 0.8
Singapore 0.5 / 0.4
Hong Kong 0.5 / 0.4
Global average > 6000: 0.8 min
https://pbs.twimg.com/media/GY4oi9WXwAEx10S?format=jpg&name=medium
https://pbs.twimg.com/media/GY4oi-SWEAA2A2w?format=jpg&name=medium
“Peter Tirschwell of SPGMarketIntel notes the basic cost to lift a container off a ship is higher in America than anywhere else in the world.”
A ports strike shows the stranglehold one union has on trade
https://t.co/Rvm3JO1WqK
Is this comparable to the British union drive to force a stoker on diesel traction? ( back then … )
From the above article I linked:
“According to the now defunct Waterfront Commission of New York Harbour, more than a third in 2020 were paid $200,000 with overtime. Dockers are among the best-paid blue-collar workers.”
“Ports elsewhere are more automated, cheaper and more productive (measured by the number of lifts on and off a ship per hour). According to a container-port performance index published by s&p and the World Bank, no American port is in the 50 most productive ports. The highest-ranked American port is Charleston at 53. It is no coincidence that Charleston is one of the less unionised.”
Just as a reference for more or less state of the art elsewhere ( probably representative for a modern terminal ) :
https://de.wikipedia.org/wiki/Containerterminal_Altenwerder#Personalbedarf
700 employees overall ( just 310 on the waterfront ) for 2.5 million TEU transfer capacity. Extensively automated.
use translation tool. the WP:EN page is rather meager.
Not sure how much cross-border freight rail traffic the US has with Canada/Mexico, but there’s a huge volume of rail traffic between China and Europe — now averaging ca. 32,000 TEUs per week. This is all seamlessly processed by (inland) freight operators.
The journey by rail from Shanghai to Rotterdam takes about 15-20 days, compared to 45 days by sea. The rail journey would be faster were it not for rail gauge differences between China, central Asia and Europe, which necessitates train swaps at 2 points along the route.
The recent spate of strikes and huge blue collar pay hikes in the US are really going to (further) erode its competitiveness.
“GE Aerospace to lay off over 70 workers at Schenectady site, WARN notice shows
https://x.com/Reuters/status/1842257167509782927
“Boeing, Striking Machinists Set to Resume Talks on Monday”
“(Bloomberg) — Boeing Co. and its largest labor union are heading back to the bargaining table on Monday in a bid to end a three-week strike that’s shut down airplane manufacturing in Oregon and Washington.
“The talks, which are being led by a federal mediator, will resume at 9 a.m. Pacific time, the International Association of Machinists and Aerospace Workers said in a statement on Friday that was seperately confirmed by Boeing. The two sides have been deeply divided over pensions and pay, the union has said in previous dispatches.”
https://www.bloomberg.com/news/articles/2024-10-04/boeing-striking-machinists-set-to-resume-labor-talks-on-monday/
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Now that the longshoremen strike has been resolved in less than week, perhaps Ortberg will have a Damascene Conversion…
Yeah about time to end the strike, Q3 result announcement is getting closer.
“Two U.S. senators have asked the Department of Justice to take tougher action against Boeing executives by holding them criminally accountable for safety issues that have impacted its airplanes.”
“In a letter dated Wednesday and sent to Attorney General Merrick Garland, Democratic Sens. Elizabeth Warren of Massachusetts and Richard Blumenthal of Connecticut said the department’s past efforts to effect change at Boeing have failed “because of its continued refusal to criminally prosecute responsible individuals.””
“”For too long, corporate executives have routinely escaped prosecution for criminal misconduct. This coddling comes at the expense of customer and worker safety, and it must end,” the senators wrote. “We therefore urge you to carefully review the behavior and potential culpability of Boeing’s executives and hold criminally accountable any individuals that have promoted a culture at the company that disregards passenger safety in violation of federal laws and regulations.”
“Boeing declined by email to comment.”
https://www.scrippsnews.com/us-news/senators-ask-justice-department-to-take-tougher-action-against-boeing-executives-over-safety-issues
Election-year posturing. Where have they been for the past several
years? Glad they decided to write a sternly-worded letter, though.
😉
Looks like AB delivered 50 frames in September. One wonders what the figure over at BA will be…somewhere around 20, if even?
The 9-month delivery figure at AB now rises to 497.
https://www.rte.ie/news/business/2024/1004/1473676-airbus-sept-deliveries-fell-9-to-50-jets-sources-say/
Actually 33 deliveries last month.
Not bad considering …
You probably will get your wish, when October deliveries come to fruition..
https://san.com/cc/boeing-strike-strategy-baffles-top-aviation-analyst-where-do-talks-go-next/
““I thought the arrival of new management with a lot of experience and understanding in the industry would make things different, but that doesn’t appear to be the case at all, I’m afraid,” aviation analyst Richard Aboulafia said of Boeing’s handling of the prolonged strike.”
—
An example of blind optimism.
Ortberg isn’t a crisis manager.
He never had to revive a company that was financially at death’s door.
He also never had to save a company that was rotten to the core on multiple fronts, and completely dysfunctional.
BA’s CEO switch = assigning a new doctor to a terminally ill patient.
Looks like Mr. Aboulafia allowed desperate hope to take over from rational prognosis.
You may just fail on accessing what Ortberg’s designated job is.
Remember Bush43 congratulating the acting chief of FEMA for a job well done.
( apparently the job was not _providing catastrophe relief in an effective and professional manner_ ….. but something “different” 🙂
Yep.