I’ve got a lot of family in the Seattle area, and the Boeing disease used to be devastating — Boeing sneezed, and families all across the region would be sent home to shiver and starve. It’s not quite as bad now, but the corporate giant is still a huge influence on the region, and when they screw up, everyone gets to suffer. And wow, but have they been screwing up, with control of the company in the hands of MBAs who really don’t know what they’re doing.
The latest catastrophe, on top of the 737 MAX disasters, is that they used prior profits to buy back stocks to artificially inflate their value, a game that was illegal before Saint Reagan wrecked the economy. That’s the kind of scheme they teach you in business school, I guess, but it means that right now they’ve got no reserves to weather the storm of airplane crashes.
This mad scramble for cash and the existential urge to “preserve cash in challenging periods” comes after this master of financial engineering – instead of aircraft engineering – blew, wasted, and incinerated $43.4 billion on buying back its own shares, from June 2013 until the financial consequences of the two 737 MAX crashes finally forced the company to end the practice. That $43.3 billion would come in really handy right now.
The sole purpose of share buybacks is to inflate the stock price because they make the company itself the biggest buyer of its own shares. But those $43 billion of share buybacks cost the company $43 billion in cash. Now those buybacks have stopped because Boeing needs every dime of cash to stay liquid and alive, and shareholders, who’d been so fond of those share buybacks, are now getting crushed by the damage those share buybacks have done to Boeing’s financial position.
I suspect airlines are facing dramatic losses of revenue as people stay home on top of that, so few companies are going to buy airplanes. Boy, aren’t those clever financial wizards running the show really great at lining their own pockets, but not so good at running an aerospace company? And yet the Republican government’s solution to economic problems is to hand these kinds of wizards even more money that they will convert into personal wealth at the expense of the company’s worth and health.