Citing the expanding contagion of COVID-19, Maxar Technologies (NYSE:MAXR) has invoked the disease as a "force majeure" that may relieve it of contractual obligations to deliver certain satellites and other spacecraft to its customers on time.
Maxar revealed its decision on in a Friday 8-K filing with the Securities and Exchange Commission. Maxar "has no confirmed cases of the illness among our workforce," said the company, and "all Maxar locations remain operational through a combination of work from home (WFH) and limited personnel working onsite for essential operations."
Nevertheless, on March 16, "the California counties of Santa Clara, San Francisco, Marin, San Mateo, Alameda and Contra Costa," an area encompassing some of Maxar's manufacturing operations, "ordered their residents to stay home and avoid all unnecessary travel to slow the spread of the novel Coronavirus." Although the company considers itself "exempt from the facility closure requirements of the order," it also considers "the order by Santa Clara County [to constitute] a force majeure event."
Accordingly, "the Company has sent force majeure notices ... to certain customers to protect its legal rights given the uncertain nature of the current pandemic and its near and long-term impacts on the cost and schedule of the numerous programs in the Company's existing backlog."
In part a proactive move anticipating greater restrictions, Maxar noted that it is also already "observing stress in its supplier base in and outside the United States," and worries that its supply chain may become at risk, preventing the company from meeting "customer commitments." By invoking force majeure, Maxar may prevent itself from being held liable in the event supply constraints prevent it from delivering contracted projects to its customers on time.