7 ms·

Is it possible for a company like Boeing to go bankrupt because of such a crisis ?

by loulouxiv 7y ago

evanriley 7y ago
Possible? Technically. Will it? Probably never, it's too much of a tool used by the US Government to ever go bankrupt.
- skissane 7y ago
  > Will it? Probably never, it's too much of a tool used by the US Government to ever go bankrupt. Of course, the US government would never allow Boeing to go out of business completely, as in a chapter 7 bankruptcy. But a chapter 11 bankruptcy, in which Boeing the business survives but its current stockholders lose everything? Not inconceivable it might happen some day, and I can't see why the US government would feel it necessary to stop that. Customers only care about the firm's products and services still being available to purchase at a reasonable price, if the stockholders lose everything that's not their problem.
  - evanriley 7y ago
    Hmm, I actually feel like you're right here. I could see them letting it go through Chapter 11. Out of curiosity, do you think they wouldn't let it even get that far to make sure they stay competitive vs Airbus?
    - skissane 7y ago
      In Boeing's current state, I don't think chapter 11 would achieve much. Their total debts aren't that large compared to their overall revenue and assets. Boeing's real current problems are poor management leading to poor corporate culture, and chapter 11 won't necessarily do anything to fix that. (I'm not sure how good Airbus' culture is either, but evidence suggests it may be better than Boeing's.) Even though 737 MAX is a big expensive mess, Boeing makes so much money on the rest of its businesses (its other commercial aircraft models, defense contracts, space, etc) I'm sure they can survive those losses. So I don't think Boeing will be filing for chapter 11 any time soon. But in 5, 10, 15 years from now? Anything could happen. Maybe they'll turn the corner from this episode, and their business will have a very bright future. Maybe they get stuck in the doldrums, and then chapter 11 might slowly become more plausible as an ultimate outcome.
lotsofpulp 7y ago
No, it’s too big to fail. Might be worth buying some stock while it’s back down to near recent lows.
- phire 7y ago
  I think it's more accurate to say it's too important to fail. Not only does Boeing produce a large number of military aircraft for the US armed forces, but their commercial arm also allows the US to project power world wide.
  - dredmorbius 7y ago
    TBTF is "too important to fail". "Too big to fail" describes a concept in which the government will intervene in situations where a business has become so deeply ingrained in the functionality of an economy that its failure would be disastrous to the economy at large. If such a company fails, it would likely have a catastrophic ripple effect throughout the economy. https://www.investopedia.com/terms/t/too-big-to-fail.asp https://www.investopedia.com/terms/t/too-big-to-fail.asp The "too big to (let) fail" theory asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and that they therefore must be supported by government when they face potential failure.[1] The colloquial term "too big to fail" was popularized by U.S. Congressman Stewart McKinney in a 1984 Congressional hearing, discussing the Federal Deposit Insurance Corporation's intervention with Continental Illinois.[2] The term had previously been used occasionally in the press.[3] https://en.wikipedia.org/wiki/Too_big_to_fail https://en.wikipedia.org/wiki/Too_big_to_fail
    - TheOtherHobbes 7y ago
      It's not an economic TBTF - it's political and strategic. Boeing in Chapter 7 wouldn't kill the US economy. It would just dent it badly, and give competitors from other countries (China? India?) an in to a large market. But the US military machine would be very badly damaged if Boeing failed. And there would be spectacular political fall out, both internally and internationally - some of which is already happening with the tarnished reputation of the FAA. Aerospace is one of those prestige industries that is as much about promoting national status as about making money. A major failure would be very bad indeed for America Inc - survivable in practical terms, but a disfiguring and ugly wart on the face of the mythology.
subculture 7y ago
Good article this morning from the Verge [1] about how airlines dependent on a monoculture fleet are in a world of hurt because they can't leave the 737 line (too entrenched operationally) but also can't wait forever for Boeing to get its act together. https://www.theverge.com/2019/10/23/20927213/boeing-737-max-southwest-planes-crash-budget-airlines-grounded-cost-maintenance https://www.theverge.com/2019/10/23/20927213/boeing-737-max-...
annoyingnoob 7y ago
I doubt it will bankrupt them. Will be interesting to see if it spills over to other parts of their business.

Is it possible for a company like Boeing to go bankrupt because of such a crisis ?

evanriley 7y ago

Possible? Technically. Will it? Probably never, it's too much of a tool used by the US Government to ever go bankrupt.

skissane 7y ago
> Will it? Probably never, it's too much of a tool used by the US Government to ever go bankrupt. Of course, the US government would never allow Boeing to go out of business completely, as in a chapter 7 bankruptcy. But a chapter 11 bankruptcy, in which Boeing the business survives but its current stockholders lose everything? Not inconceivable it might happen some day, and I can't see why the US government would feel it necessary to stop that. Customers only care about the firm's products and services still being available to purchase at a reasonable price, if the stockholders lose everything that's not their problem.
- evanriley 7y ago
  Hmm, I actually feel like you're right here. I could see them letting it go through Chapter 11. Out of curiosity, do you think they wouldn't let it even get that far to make sure they stay competitive vs Airbus?
  - skissane 7y ago
    In Boeing's current state, I don't think chapter 11 would achieve much. Their total debts aren't that large compared to their overall revenue and assets. Boeing's real current problems are poor management leading to poor corporate culture, and chapter 11 won't necessarily do anything to fix that. (I'm not sure how good Airbus' culture is either, but evidence suggests it may be better than Boeing's.) Even though 737 MAX is a big expensive mess, Boeing makes so much money on the rest of its businesses (its other commercial aircraft models, defense contracts, space, etc) I'm sure they can survive those losses. So I don't think Boeing will be filing for chapter 11 any time soon. But in 5, 10, 15 years from now? Anything could happen. Maybe they'll turn the corner from this episode, and their business will have a very bright future. Maybe they get stuck in the doldrums, and then chapter 11 might slowly become more plausible as an ultimate outcome.

lotsofpulp 7y ago

No, it’s too big to fail. Might be worth buying some stock while it’s back down to near recent lows.

phire 7y ago
I think it's more accurate to say it's too important to fail. Not only does Boeing produce a large number of military aircraft for the US armed forces, but their commercial arm also allows the US to project power world wide.
- dredmorbius 7y ago
  TBTF is "too important to fail". "Too big to fail" describes a concept in which the government will intervene in situations where a business has become so deeply ingrained in the functionality of an economy that its failure would be disastrous to the economy at large. If such a company fails, it would likely have a catastrophic ripple effect throughout the economy. https://www.investopedia.com/terms/t/too-big-to-fail.asp https://www.investopedia.com/terms/t/too-big-to-fail.asp The "too big to (let) fail" theory asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and that they therefore must be supported by government when they face potential failure.[1] The colloquial term "too big to fail" was popularized by U.S. Congressman Stewart McKinney in a 1984 Congressional hearing, discussing the Federal Deposit Insurance Corporation's intervention with Continental Illinois.[2] The term had previously been used occasionally in the press.[3] https://en.wikipedia.org/wiki/Too_big_to_fail https://en.wikipedia.org/wiki/Too_big_to_fail
  - TheOtherHobbes 7y ago
    It's not an economic TBTF - it's political and strategic. Boeing in Chapter 7 wouldn't kill the US economy. It would just dent it badly, and give competitors from other countries (China? India?) an in to a large market. But the US military machine would be very badly damaged if Boeing failed. And there would be spectacular political fall out, both internally and internationally - some of which is already happening with the tarnished reputation of the FAA. Aerospace is one of those prestige industries that is as much about promoting national status as about making money. A major failure would be very bad indeed for America Inc - survivable in practical terms, but a disfiguring and ugly wart on the face of the mythology.

subculture 7y ago

Good article this morning from the Verge [1] about how airlines dependent on a monoculture fleet are in a world of hurt because they can't leave the 737 line (too entrenched operationally) but also can't wait forever for Boeing to get its act together. https://www.theverge.com/2019/10/23/20927213/boeing-737-max-southwest-planes-crash-budget-airlines-grounded-cost-maintenance https://www.theverge.com/2019/10/23/20927213/boeing-737-max-...

annoyingnoob 7y ago

I doubt it will bankrupt them. Will be interesting to see if it spills over to other parts of their business.