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The crisis around Boeing, once a blue-chip stock, is getting worse. Investors are about to find out exactly how much damage has been done.
Boeing, which reports third quarter earnings on Wednesday, is expected to show a return to profitability. But that will be overshadowed by all the bad news plaguing the company.
The chief concern: Investors are desperate for guidance on when Boeing’s best-selling plane, the 737 Max, can return to service, my CNN Business colleague Chris Isidore reports. The plane has been grounded since March, following two fatal accidents that killed everyone on board.
Boeing has already taken a $5 billion charge related to compensation it expects to give to its airline customers. It’s likely to announce a new charge Wednesday because of continuing delays in getting approval for the plane to fly again, according to Cai von Rumohr, an aerospace analyst at Cowen.
The company faces ongoing scrutiny from US regulators about the original certification process for the plane back in 2016. The Federal Aviation Administration chastised Boeing last week for only recently alerting the agency to concerns expressed during the process by employees. That revelation has weighed on Boeing shares, which have plunged more than 20% since March.
On the ground: Boeing has continued to build the 737 Max during the grounding in order to try to meet a backlog of more than 4,000 orders for the plane. But it won’t get most of the revenue from sales of the plane until delivery.
CEO Dennis Muilenburg, who was stripped of his chairman title earlier this month by the company’s board, has said that Boeing could be forced to suspend production of the Max if approval for it to fly again is not completed by the end of the year.
The latest: A top Boeing executive was ousted on Tuesday, the first high-profile exit since the crisis began. Kevin McAllister, who had been president and CEO of the unit that builds Boeing’s passenger jets, has been replaced by Stan Deal, the head of the company’s services division.
Nike’s CEO will step down next year
After 13 years at the helm, Nike CEO Mark Parker is stepping down.
Parker will hand the reins to an outsider, John Donahoe, in January, the company said Tuesday. Donahoe, a Nike board member and CEO of cloud computing company ServiceNow, will focus on Nike’s digital transformation.
The shock announcement comes less than two years after Nike said Parker would remain CEO “beyond 2020,” my CNN Business colleague Clare Duffy reports.
The scene, from Clare: “Parker’s tenure at Nike has been marred by two major scandals in the past two years. In the spring of 2018, there was an executive overhaul and multiple lawsuits over alleged gender discrimination and a ‘boys’ club’ culture at Nike. More recently, the company shut down its running club, Nike Oregon Project, after longtime coach Alberto Salazar was banned from the sport for four years for doping violations.”
Parker shot down the idea that those issues were involved in his departure in an interview with CNBC on Tuesday. In a note to employees, he wrote: “To be clear, I’m not going anywhere. I’m not sick. There are no issues I’m not sharing. I strongly believe the best way for us to evolve and grow as a company is to bring in a phenomenal talent to join our team who has long been part of the Nike family.”
Also happening: Under Armour founder Kevin Plank is also out as CEO of the Nike rival. But NPD Group retail analyst Matt Powell said that move was less “abrupt.”
Mark Zuckerberg heads to Washington
Truth in political advertising. Election interference. Libra. These are just some of the issues Faceboo CEO Mark Zuckerberg is likely to be grilled on when he testifies before Congress on Wednesday. It’s his first appearance before lawmakers in 18 months.
Facebook announced a slew of policy changes this week surrounding elections and disinformation. The company said it will begin monitoring its platform for fraudulent logins and other malicious activity targeting campaign workers. It will also identify content by government-controlled media outlets, and will soon label false or misleading content on Instagram.
Those changes aren’t likely to lower the temperature in Washington — especially as the House Financial Services Committee drills into Libra. Representative Maxine Waters, the committee’s Democratic chairwoman, has slammed Facebook’s attempt to launch a digital currency, and has called for the project to be halted, my CNN Business colleague Brian Fung reports.
Zuck’s counterpoint: Zuckerberg is expected to explain that Facebook’s foray into digital currency is not intended to compete with existing government-backed currencies, and will address policymakers’ concerns about terrorism financing and money laundering.
“I want to be clear: Facebook will not be part of launching the Libra payments system anywhere in the world until US regulators approve,” he wrote in prepared remarks that were released Tuesday.
SoftBank’s WeWork bailout hits shares
It’s official: SoftBank, WeWork’s biggest investor, will bail out the troubled co-working startup in a deal that gives the Japanese tech company almost total ownership.
The agreement marks a stunning fall from grace for WeWork. It values the company — which was running low on cash after a failed IPO attempt — at about $8 billion, according to a person familiar with the matter. That’s down from a peak of $47 billion. Even so, disgraced founder Adam Neumann could walk away with a massive $1.7 billion payout.
Attention now shifts to SoftBank, which will hold 80% of WeWork as a result of the deal. Investors aren’t happy that CEO Masayoshi Son and team have been left holding the bag. Shares of SoftBank fell 2.5% in Tokyo on Wednesday. After a tough year, Masa Son’s Vision Fund clearly needs a big win — and soon.
Earnings galore. Blackstone, Boeing, Caterpillar, Hilton and Invesco will report before US markets open. Ford, eBay, Microsoft, PayPal and Tesla will follow after the close.
- Facebook CEO Mark Zuckerberg is scheduled to testify in front of the House Financial Services Committee at 10 a.m. ET.
- US crude oil inventories post at 10:30 a.m. ET.
Coming tomorrow: It’s the final European Central Bank meeting with Mario Draghi as president. Time to say your goodbyes.