Boeing Co. BA shares extended declines Monday after the Wall Street Journal said the planemaker is considering plans to cut spending and raise more debt in order to bolster its finances amid the ongoing pressures from the grounding of its flagship 737 MAX jet.
The Journal said Boeing could defer capital expenditures, cut R&D spending or possible cease targeting acquisitions as it moves to repair its balance sheet under new CEO David Calhoun, who assumes his role on January 13. Boeing may also raise as much as $5 billion in new debt to potentially cover part of the $6.1 billion the company has earmarked for compensation to the families of the 346 people who died from 737 MAX crashes in Ethiopia and Indonesia.
Boeing shares were also pressured by a report that it's looking into potential wiring problems within the 737 MAX at the urging of the Federal Aviation Administration.
"We identified this issue as part of that rigorous process, and we are working with the FAA to perform the appropriate analysis. It would be premature to speculate as to whether this analysis will lead to any design changes," wrote a Boeing spokesman in an email to TheStreet in a request for a comment on the matter that was first published in the New York Times over the weekend.
"Our highest priority is ensuring the 737 MAX meets all safety and regulatory requirements before it returns to service," the spokesperson said.
Boeing shares were marked 1.2% lower in early trading Monday to change hands at $328.71 each, a move that would extend its three-month decline to around 12.5%.
Late last month, Boeing fired its embattled CEO, Dennis Muilenburg, just days after the world's second-largest planemaker said it would miss its own deadline for recertification of the grounded 737 MAX.
Boeing's senior unsecured credit rating was cut by one notch, to A3, by Moody's Investors Service shortly after, a decision it said reflected the "regulatory uncertainty regarding when the 737 MAX will be allowed to return to service across the globe and the potential future regulatory burdens regarding certification of new-design and updated aircraft."
Boeing said it would indefinitely suspend production of its grounded 737 MAX jet after failing to meet a self-imposed target for its recertification from the Federal Aviation Administration.
Boeing reached its decision following a two-day December board meeting in Chicago that came after the FAA's chief administrator, Steve Dickson, cautioned that multiple milestones need to be met before the MAX could be granted clearance.
Boeing had tabled a December return for the workhorse jet, which was grounded last spring following two fatal crashes over a five-month span between 2018 and 2019 that killed 346 people in Ethiopia and Indonesia and has cost the company more than $9 billion.
"We believe this decision is least disruptive to maintaining long-term production system and supply chain health," Boeing added. "This decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft."
The planemaker said earlier this month that it booked 30 new orders for the 737 last month, much of which came from the Dubai Airshow in the United Arab Emirates, with Turkey's Sun Express buying 10 737 MAX 8 planes, while an unidentified customer --reportedly Kazakhstan's Air Astanta 00 signed up to buy 20 more 737s.
Boeing also said it would increase costs related to the grounded 737 MAX by around $900 million, taking the total to around $3.6 billion, but noted at the time that it forecast production rising from 42 planes a month to 57 planes per month by the end of 2020.