Support for seditious Republicans could have helped Boeing’s stock. To explain, on 23 June 2021 the left-wing Citizens for Responsibility and Ethics in Washington (CREW) published its Sedition Caucus report.
The Sedition Caucus is a list of corporations that gave money to Congressional Republicans who voted not to certify Joe Biden’s (D-Delaware) election as president. CREW lists the Boeing Co. (NYSE: BA) as the biggest donor to the National Republican Senatorial Committee (NRSC) and the National Republican Congressional Committee (NRCC) after the 6 January riot at the US Capitol.
Boeing gave the NRSC and the NRCC $210,000, CREW alleges The NRCC and the NRSC are political action committees (PACs) that support Congressional Republicans. To its management’s credit, Boeing gave no money to individual members of Congress who voted against certification.
The biggest donor to individual Republicans who voted against certification in support of former President Donald J. Trump’s (R-Florida) “Stop the Steal Lie” was Toyota (TMC). CREW claims Toyota gave $56,000 to individual Republicans who voted against certification.
Is there a Sedition Bump?
Interestingly, Boeing’s stock price rose from $243.57 on 23 June 2021, the day Crew released the Sedition Caucus report, to $250.57 on 24 June 2021.
However, Boeing (BA) fell to $235.76 on 29 June 2021 and rose to $236.68 on 1 July 2021. Boeing’s stock probably fell because the Federal Aviation Administration (FAA) delayed certification for the giant 777X wide-body airliner.
The FAA’s experts are skeptical of the 777X’s software and hardware, The Seattle Times claims. In particular, FAA officials think the 777X’s flight control system is unsafe. The 777X is critical for Boeing’s future because the giant plane could move enormous amounts of cargo.
In contrast, Toyota Motor Corp (NYSE TM) shares fell from $179.39 on 22 June 2021 to $178.10 on 25 June 2021. Thus, Mr. Market rewarded Boeing for giving money to Republicans and punished Toyota for supporting the Sedition Caucus.
Is Boeing making money?
I think Boeing (BA) is vulnerable to political shakedowns of the type the NRCC and NRSC specialize in because it loses money.
Notably, Boeing reported a quarterly operating loss of -$83 million on 31 March 2021. The operating loss shrank from -$8.049 billion on 31 December 2020.
In contrast, Boeing reported a quarterly gross profit of $15.22 billion and a quarterly gross profit of $1.415 billion on 31 March 2021. Notably, Boeing’s quarterly revenues fell from $16.909 billion on 31 March 2020.
Moreover, Boeing is burning cash. It reported a quarterly operating cash flow of -$3.387 billion on 31 March 2021. However, Boeing reported a quarterly ending cash flow of $7.059 billion on the same day.
Yet Boeing is a cash-rich company. It had $21.92 billion in cash and short-term investments on 31 March 2021. Boeing is a debt-rich company it had $63.575 billion total debt on 31 March 2021.
Why Boeing is vulnerable to political shakedowns
Boeing (BA) needs federal contracts such as the Crew Space Transportation (CST-100) Starliner to survive.
The CST-100 Starliner is a 21st Century space capsule that is far behind its competitor the SpaceX Dragon. The SpaceX Dragon has carried astronauts to the International Space Station (ISS). In contrast, the CST-100 is still undergoing testing with a dummy they call Rosie the Rocketeer, Space.com reports.
Boeing is also heavily dependant on military contracts. Boeing military vehicles include the C-17 Globemaster III, Air Force One, the F/A-18 Super Pilot fighter plane, the Chinook helicopter, drones, and the V-22 Osprey. Hence, Congressional Republicans are in a position to force Boeing to give them money.
Remember, Boeing needs to pay off that $63.575 billion debt at a time when demand for airliners is falling. Hence, Republican leaders such as US Senator Mitch McConnell (R-Kentucky) and US Representative Kevin McCarthy (R-California) are in position to shake Boeing down for big money.
To explain, McCarthy and McConnell can order Congressional Republicans to vote against defense contracts Boeing profits from. Hence, Toyota’s strategy of giving money directly to individual Republicans could be better, even if it is less ethical.
Is Toyota Making Money?
In contrast to Boeing (BA), Toyota (TM) is making enormous amounts of money.
Toyota reported a quarterly operating income of $6.288 billion on 31 March 2021. Impressively, Toyota’s quarterly income grew from $3.542 billion on 31 March 2020. Similarly, Toyota’s quarterly gross profit grew from $10.031 billion on 31 March 2021 to $13.341 billion on 31 March 2020.
Moreover, Toyota’s quarterly revenues rose from $65.419 billion on 31 March 2020 to $69.340 billion on 31 March 2021. Plus, Toyota’s quarterly operating cash flow rose from $6.466 billion on 31 March 2020 to $8.06 billion on 31 March 2021. Toyota finished the pandemic year with a quarterly operating cash of $4.94 billion on 31 March 2021.
On 31 March 2021, Toyota reported $46.037 billion in cash and short-term investments of $46.037 billion and $561.991 billion in Total Assets. However, Toyota reported $231.591 billion in total debt on 31 March 2021.
Toyota does not need to donate to Republicans
I think Toyota (TM) is not vulnerable to political shakedowns because of the cash it generates.
Hence, Toyota could easily ignore Congressional Republicans. Unfortunately, it is not. A circumstance that raises serious questions about the judgment and ethics of Toyota’s management.
We must remember that corporations like Toyota and Boeing did not create the corrupt political finance system in the United States. The US Supreme Court did that with the Citizens United decision. To explain, Citizens United struck down federal laws banning and limiting corporate donations.
Yet companies such as Toyota support that system by donating money. CREW’s report shows that investors need to consider the ethics of corporate donations.
We Need to Get Corporations out of Politics
Shareholders need to realize that corporations could give money to politicians who promote policies they consider unethical and destructive. For example, pro-life investors could own shares in companies that give money to pro-choice politicians.
In addition, corporations often give money to individual politicians many shareholders will find objectionable. For example, US Senate Minority Leader Mitch McConnell (R-Kentucky) and US Speaker of the House Nancy Pelosi (D-California) whom many Americans on both sides of the political aisle view as corrupt and treacherous.
Consequently, overturning Citizens United and banning corporate campaign donations will help investors by getting corporations out of politics.
Originally published at https://marketmadhouse.com on July 5, 2021.