(Bloomberg) -- Boeing Co. will likely continue to burn cash next year as it grapples with the challenges of ramping up production again following a prolonged labor strike and regulatory scrutiny over its factory processes.
Free cash flow is set to be negative in the first half before turning positive in the later part of the year, Chief Financial Officer Brian West told analysts on a call after the company released earnings. Boeing will also see an outflow in the final quarter of this year, he said, after draining more than $10 billion in the first three quarters.
“We expect the first half to be a cash usage and the second half to be positive and then build real momentum as we exit the year and return to more stable production rates,” West said. “So the calendar year is likely to be a usage, but the profile is important as we set ourselves up for the recovery.”
While the cash consumption in 2025 won’t be as bad as what’s expected for this year, the cautious outlook underscores the long road to recovery for a company that’s been in constant crisis since January. Boeing originally had a similar cash outlook for this year — a drain in the first six months turning into a gain in the latter part — before a worker strike that started in September upended those plans.
‘Constructive Dialog’
Production of Boeing’s 737 Max jet has halted amid the strike at its Pacific Northwest factories, depriving the planemaker of its biggest cash-generating product for the time being. The Federal Aviation Administration has capped jet output until it’s satisfied the company has improved its quality-control processes, after a door-shaped panel blew off a 737 Max 9 model during flight in early January.
Boeing fell as much as 4%, reversing an earlier gain, after the company indicated the strike and its aftermath would continue to weigh on results through 2025. Kelly Ortberg, who took over as chief executive officer in August, declined to comment on whether he’d keep a target of generating $10 billion in cash by the end of 2026.
“All the financial forecasts, the long-term outlook are under review,” Ortberg said on the call. “I need some time to assess that. And certainly we need to see some stability in the business to be able to put any kind of target out there.”
Work related to preparing the 777X for its much-delayed entry into service in 2026 will also weigh on cash flow next year, West said. The magnitude of the cash drain will be determined by whether workers vote later on Wednesday to accept the planemaker’s latest wage increase offer or continue a strike that has crippled Boeing’s production for weeks.
In the third quarter, Boeing had negative free cash flow of $2 billion.
Boeing is working to fend off potential credit-rating downgrades, after both Moody’s Ratings and S&P Global Ratings said in recent weeks that they were considering cutting its credit grades into junk territory. The company laid the groundwork earlier this month for raising as much as $25 billion by selling any combination of stock and bonds.
“We are in active engagement with the rating agencies, and it’s a constructive dialog and they help inform the plan that we have,” West said.
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