J.P. Even if Boeing stops production of the 737 Max, it will burn more than $1 billion a month, Morgan said. Seth Seifman, an analyst, said Boeing’s decision to suspend the 737 Max was due to months of cash loss caused by the suspension of the aircraft. However, the company’s internal management and labor costs will remain the same and will increase cash consumption.
On the one hand, Mr Seifman said, Boeing still had to pay for internal management and labor costs. In addition, the company is required to support its suppliers before the 737 Max is allowed to return to flight, which is the main cost to maintain future production capacity.
“We estimate that Boeing spends nearly $2 billion a month on MAX, but that number will not drop to zero between the 737 Max shutdowns,” he wrote. We expect Boeing to support suppliers who account for approximately 65% of the 737 cost base to retain labor and production capacity. For now, we assume that about 50 percent of supply chain cost consumption is suspended and monthly cash consumption is still over $1 billion. ”
Boeing’s shares were lower in early trading and are now up 0.5 percent.
JPMorgan still maintained Boeing’s stock holding rating, but cut its target price to $370 from $400 a share. That still means Boeing still has 13 percent room to rise from Monday’s closing price of $327.