S&P downgrades Boeing

S&P said it lowered its long-term issuer credit rating on Boeing Co. to A- from A on news the company plans to suspend production of the 737 MAX in January 2020, and there is still significant uncertainty as to when it will resume deliveries.

Boeing’s suspension of production of the 737 MAX may save some cash in the near term, but it could introduce additional risk into the supply chain. The company said it doesn’t plan to furlough any workers on the program and will likely have to support some suppliers, so the cash saved from stopping production could be modest.

“We believe Boeing is likely to support weaker suppliers. But the longer production is halted, the more likely that some, especially smaller suppliers, could run into liquidity problems or take other actions (such as furloughing employees that will be difficult to rehire in a tight labor market). That will make it difficult for them to support MAX production once it resumes. Furthermore, the supply chain for the MAX is global and very complex. Stopping and restarting could be costly and difficult,” S&P said in a press release.

The outlook is developing.

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