In recent developments, over 30,000 workers at Boeing walked off their jobs after rejecting a proposed contract, halting production of the company’s flagship product—the 737 MAX jet. This significant disruption raised concerns about a potential cash crunch, as Boeing’s Chief Financial Officer revealed the company is struggling to maintain its investment-grade credit rating.

A strong credit rating is vital to the operations of any business, as a downgrade can directly increase borrowing costs. Unsurprisingly, companies with investment-grade ratings work diligently to protect them. A downgrade would not only affect financial flexibility but could also weaken investor confidence and raise the cost of future capital.

The ESG (Environmental, Social, and Governance) aspect of a credit rating report considers labour issues as critical factors affecting credit risk. Labour relations, employee practices, and overall well-being are influenced by both internal dynamics and external pressures. As a result, labour disputes—including strikes—can have far-reaching consequences for businesses, especially if prolonged. Strikes can lead to reputational damage, productivity losses, and increased operational costs.

In some cases, escalating workers action signals a growing risk of rising labour costs. Companies often offset these by increasing prices on goods and services, which can lead to inflationary pressures and a potential decline in demand.

Given the potential impact, three international Credit Rating Agencies (CRAs) have issued warnings that an extended strike at Boeing’s US factories could result in a credit rating downgrade. This presents a serious concern for Boeing, which is already managing substantial debt.

Boeing’s last significant strike in 2008 lasted 57 days and caused a 52-day production shutdown. It then took an additional 4-6 weeks to return production to pre-strike levels. A strike of similar length today would significantly harm Boeing’s operational efficiency and exert pressure on its liquidity, potentially leading to negative rating actions unless new liquidity is secured in a credit-conscious manner.