Good day all. As we’re all sitting here, counting our cache of toilet paper, there are real issues going on. One of them is the impending collapse of the Boeing Company. Thanks to their utter stupidity with the 737 Max, along with this Wuhan Flu business, Boeing is starting to suck around for a government bailout.
Boeing has been in some real financial difficulties since the grounding of the entire 737 Max fleet, and the FAA pulling the flight certifications. I won’t bother going into the details of that fiasco, others have done so who are far better technically then I ever will be. Now, with the Coronavirus forcing manufactures to temporarily shut down, Boeing is burning through cash eve faster then if they just set it on fire. Now they are hinting that the “Aerospace Industry” must have a massive taxpayer bailout. Here are some of the details from The Hill:
Boeing is sounding the alarm and pleading with Washington for a $60 billion bailout for the company and its aerospace suppliers.
The company’s stock plummeted nearly 18 percent on Wednesday amid growing worries about how the aircraft maker and defense contractor would weather a series of recent storms. The coronavirus outbreak has devastated global travel, delivering a blow to Boeing, which was already in a fragile state after the grounding of its Max 737 jets and setbacks to fixing and delivering KC-46 military tankers for the Pentagon.
President Trump and lawmakers have vowed to provide assistance to the company, even as other industries, including the airlines, line up for help from Washington. As a major employer, Boeing has long held clout in Washington and the company is marshaling those resources in what experts say is its toughest test yet.
“It’s just an incredible confluence of factors that really put them behind the eight ball,” said Andrew Hunter, a former Pentagon official and now an expert with Washington, D.C., think tank the Center for Strategic and International Studies.
No, not really, but please, continue.
“Boeing probably would have weathered the 737 Max issues and other issues that they’ve had with production… but this crisis, in scope and scale is far beyond the others.”
Would Boeing have gotten through the fiasco of the 737 Max? I’m not so sure. Because of their incompetence and playing games with the certification process, Boeing was in the process of taking it in the shorts. The KC-46 tankers the Air Force needs have been pretty much rejected by the Air Force, apparently due to Boeing not actually following the specifications laid out by the Air Force, and some games being played with regards to the contracts. (This may be incorrect) So, how will the bail out of Boeing’s incompetence be structured?
The $60 billion bailout would be in the form of access to public and private liquidity, including loan guarantees, for the aerospace manufacturing industry, Boeing proposed on Tuesday.
“This will be one of the most important ways for airlines, airports, suppliers and manufacturers to bridge to recovery. Funds would support the health of the broader aviation industry, because much of any liquidity support to Boeing will be used for payments to suppliers to maintain the health of the supply chain,” according to a Boeing statement.
Boeing stressed that the long-term outlook for the industry remains strong, but stressed that it needs immediate relief until the coronavirus crisis passes. Boeing’s shares have shed over 60 percent of its value in the last month.
And a lot of that loss was due to Boeing’s management screwing up by the numbers. Interestingly, I don’t see Lockheed asking for a bailout. Of course, I haven’t read anything about Lockheed’s aircraft crashing because they outsourced the development of the flight control software to a company in India that had zero experience in the field.
Trump indicated that Boeing would get financial assistance on Tuesday and said that he considered it the best company in the world before it came under scrutiny over the safety of its 737 Max aircraft, which were involved in two deadly crashes.
Boeing is a great company. The problem is the managers and accountants.
“Yes, I think we have to protect Boeing. We have to absolutely help Boeing,” Trump said at the White House on Tuesday “Obviously when the airlines aren’t doing well then Boeing is not going to be doing well. So we’ll be helping Boeing.”
With all due respect Mr. President, you are incorrect. Let Boeing fail. They will go into Chapter 11 and reorganize. Yes, this will send a ripple through the industry, but it will also mean that the morons who have run this company into the ground will be punished by the shareholders and others. I might also add, the plan to bail out Boeing is not receiving uniform support.
Textron Aviation, for example, on Wednesday announced four-week furloughs for most of its U.S.-based workforce. The furlough will affect more than 7,000 workers at the defense contractor, which makes training aircraft for the Air Force.
This is probably due to the China Flu Panicdemic more then anything else.
“I think some people feel like it’s too much money being talked about for Boeing specifically,” the defense industry lobbyist said. “Boeing, I think, has asked for a lot of money to also make up for the problems that were of their own creation … they were already furloughing employees long before this crisis started.”
Textron, as far as I can tell, has done nothing wrong. They are the ones who might need a loan of some sort. I don’t think they have done anything as incredibly stupid as outsourcing the writing of the flight control computer code to a company with absolutely no experience in doing so, all to save a buck. I won’t bother with the idiocy that is the K-46 tanker. Of course, Boeing pretty much owns congress.
According to Andrew Hunter, “When Boeing goes into a member of Congress’s office, usually it’s the ‘this is our facility in your state or district that employs thousands of your constituents.’ That’s what makes their message get heard and penetrate in a way that might not be so easy if they didn’t have as broad of a business base as they do.”
But Boeing will also have to compete for relief with other industries impacted by quarantines and closures due to the coronavirus.
They also have to figure out how they’re going to justify asking the taxpayers to bail them out after all the major screw ups over the last few years, including the 737 Max mess. Frankly, I’m in no mood to bail them out. They deserve corporate execution via the bankruptcy courts. If Congress wants bail them out, then they need to put conditions on it that forces all the decision makers out, at least the ones responsible for the mess Boeing is in. Otherwise, Chapter 11 and reorganize.
Thatisall
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