Boeing’s labor strike entered its sixth week on Friday. With 33,000 workers from the International Association of Machinists (IAM) off the job and on the picket lines, Boeing (BA -0.20%) production of 737, 767, and 777 airliners is shut down and, according to even the most conservative estimates, Boeing is losing $1 billion a month as the strike drags on. (Other estimates rise as high as $1 billion a week.)

With IAM’s rejection of Boeing’s offered 25% pay raise, and the union’s refusal to consider a Boeing “best and final” offer of 30%, you might think that the pressure on Boeing to settle this strike is becoming unbearable.

But something just changed — and now I believe the advantage favors Boeing.

Headline risk

Is Boeing or is the union “the bad guy” in this debate? That depends on whom you ask. But ask any of the 17,000 Boeing workers who are about to lose their jobs, and it’s likely they’ll blame IAM.

On Friday last week, new Boeing CEO Kelly Ortberg circulated a memo within the company explaining that the IAM labor strike has put Boeing in “a difficult position” that’s forcing management to make “difficult decisions.” Among these decisions, Boeing will delay introduction of its new 777X airliner (which was to be built in Washington state, where the strike is happening), by about a year, to 2026.

The company will also shutter its 767 Freighter program, effective 2027, once it has completed production of the 89 Boeing 767s it has under contract. (Production of KC-76 aerial refueling tankers for the Air Force, which are based on the 767 design, will continue — so it’s possible the 767 will be revived in the future.) 

Worst of all, Ortberg announced that Boeing will need to “reset our workforce levels to align with our financial reality and to a more focused set of priorities.” And specifically, Boeing will “reduce the size of our total workforce by roughly 10 percent” — 17,000 workers.

What this means for Boeing and IAM

Admittedly, not all of this is the union’s fault.

Boeing management did itself no favors when it bid low on the KC-76 contract back in 2011. The resulting losses dog Boeing to this day — one big reason why Boeing’s Defense and Space (BDS) business is now losing money, and will continue losing money as Boeing continues building KC-76s for the Pentagon.

And speaking of space, that side of Boeing has suffered unforced errors as well. These include multiple glitches on its Starliner spacecraft, and an overdue and overbudget Space Launch System that (NASA says) both arise from “a recurring and degraded state of product quality control” and a “lack of a sufficient number of trained and experienced aerospace workers at Boeing.”

I can’t imagine that laying off 17,000 aerospace workers will help fix that latter problem. But this is just one more reason why IAM might come under fire for exacerbating Boeing’s problems at the very moment the CEO is trying to fix them.

Boeing plays for time

As this strike enters its sixth week, with no end in sight and the potential to last longer than the 2008 strike (which lasted nearly two months), pressure will rise on both sides to return to the negotiating table and make a deal.

Boeing, however, will soon be in a better position to withstand this pressure.

As I predicted last week, Boeing is reverting to its “How to Survive a Crisis” playbook, first written during the peak of the COVID-19 pandemic. Today, just like then, Boeing suffers from a lack of incoming cash to keep itself solvent. And today, just like then, Boeing has decided to replenish its cash reserves with a combination of share sales and debt raises.

On Tuesday, Boeing announced a supplemental credit agreement with four major U.S. banks that will give it access to a $10 billion credit line — enough money to keep Boeing in business for two and a half months (assuming the estimate that Boeing is losing $1 billion a month is correct). This alone could enable Boeing to survive a strike even longer than the one in 2008 — but Boeing is laying plans to ensure it can last even longer if needed.

Simultaneous with the credit agreement, Boeing laid out plans to raise a further $25 billion through sales of debt securities, common and preferred stock, and other securities. Combined with the credit agreement, this will give Boeing access to as much as $35 billion in cash should it be required — enough money to outlast the longest strike IAM might conceivably attempt.

The upshot for investors

Admittedly, depending on how management structures its capital raise, Boeing could also end up with a monster debt load as high as $93 billion — even more debt than its own market capitalization — which could render the stock uninvestable. (At least I would have serious reservations about recommending Boeing stock with that much debt). The plan, therefore, resembles a threat of mutually assured destruction — if the IAM continues to strike, Boeing might blow up the company, which wouldn’t be great news for either side.

But that doesn’t mean the threat won’t work.