Monday, September 21, 2020
Sept. 21, 2020

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In Our View: Stimulus option for troubled Boeing reassuring

The Columbian

The $2.2 trillion stimulus package signed last week by President Donald Trump includes something for just about everybody — including Boeing. Whether the embattled aerospace giant will choose to accept remains in question, but the offer should stand until Boeing is on more secure footing.

The outcome will resonate throughout the state economy. As Sen. Maria Cantwell, D-Wash., said after the deal was approved: “With supply-chain layoffs already happening, it’s important for the aerospace industry — which employs 136,000 Washingtonians — to have access to capital and liquidity.”

Under the bill, Boeing could have access to federal grants designed to help it weather the COVID-19 crisis. That would give the federal government a stake in the company, something executives would prefer to avoid. “If they force it,” CEO David Calhoun said while the stimulus package was under consideration, “we just look at all the other options, and we’ve got plenty of them.”

There is precedent for the federal government owning a piece of an industry considered too big to fail. In the 2008 bailout of General Motors, the U.S. government took a 61 percent stake in the auto manufacturer in exchange for massive loans. The government sold the stock as the company rebounded. The cost ended up being about $11 billion, but more than 1 million jobs were saved and the company survived the Great Recession.

Boeing officials have said they would prefer loan guarantees, which can lower the cost of borrowing and make it easier to secure loans. In February — before the coronavirus pandemic hit the United States — the company borrowed $13.8 billion from a consortium of banks. It also announced it would suspend the dividend it has paid continuously since 1942, and would halt stock buybacks.

The stimulus bill prohibits stock buybacks for companies receiving federal assistance. Trump said: “I don’t want to give a bailout to a company and then have somebody go out and use that money to buy back stock in the company. … So I may be Republican, but I don’t like that.”

Since the Reagan administration opened the door to stock buybacks, companies have used them to bolster stock prices — and CEO compensation tied to those stocks — while depleting cash reserves.

For Boeing, times were tough even before COVID-19. The 737 Max jetliner has been grounded globally since March 2019, following two crashes that killed 346 passengers. The company has suffered from poor sales and has closed some production lines.

The economy-ravaging coronavirus has added to those problems, both in financial and human costs. The Seattle Times reported that a worker at the company’s Everett plant died from COVID-19, and on Wednesday, Boeing shut down its Puget Sound production facilities.

With Boeing being Washington’s largest private employer, what happens there ripples throughout the state. The federal government is wise to offer assistance for companies large and small in an attempt to prevent an economic depression, and it is wise to attach meaningful conditions to that offer. In addition to the equity stake and prohibition on stock buybacks, there also are provisions limiting executive salaries.

Ideally, Boeing can remain stable throughout the pandemic and the aftermath and can soon be putting people back to work. And, ideally, it can do so without needing a boost from the federal government. But it is reassuring to know that such a boost is available if necessary.