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Boeing shares fall as analyst deems 787 cost recoup `Unachievable'

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Boeing Co. tumbled after an analyst downgraded the stock to “underperform” and said the U.S. planemaker stood little chance of fully recovering almost $29 billion that’s been sunk into producing the 787 Dreamliner jet. The shares fell 1.9 percent to $130.11 at 11:25 a.m. in New York. The stock earlier dropped 3.2 percent, the most intraday since Feb. 24. Boeing had declined 8.2 percent this year through Tuesday, the fourth-worst performance among the 30 members of the Dow Jones Industrial… (www.bloomberg.com) עוד...

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ColinSeftel
Colin Seftel 8
To fully understand how Boeing went wrong during the development of the 787, download and read this article, "The cost of trying to control cost" by Chad Smith:
http://demanddrivenperformance.com/dreamliner/
To summarize, the author traces the root of Boeing's problems to the 1997 merger with McDonnell-Douglas, when MD executives began to apply the same failed practises that got them into financial difficulties at Boeing. To quote from the article, "McDonnell-Douglas in effect acquired Boeing with Boeing's money. McDonnell-Douglas executives became key players in the new company, and the McDonnell-Douglas culture, averse to risk and obsessed with cost-cutting, weakened Boeing's historical commitment to making big investments in new products."
It sounds counter-intuitive, but it was their focus on cost reduction led to these huge cost overruns.
chalet
chalet 1
I was not aware of this piece; somewhat outdated but very interesting. The autor does not address the admittedly negative effect of Phil Condit decision to move the HQ to Chicago. That prompted another problem as there was a marked disconnect and slowness at making crucial decisions (the suttling back and forth between Chcago and Seattle I am told was, is and will be for years to come a waste of millions of man-hours lost as compared to what would have been if they stayed in the NW)
jdriskell
James Driskell 1
Phil Condit was an idiot. He was relieved of his post as CEO and didn't he go to jail? Apparently he was schooled and believes the phrase, "don't confuse me with facts, my mind is made up" when he decided to migrate to the mid-west.
nasdisco
Chris B 7
With both Airbus and Boeing reducing production, and Boeing making massive layoffs, makes me believe that the world economy isn't as strong as it appears to many in the US.
We need both companies to be strong (and Bombardier to survive) if they are to fight off the looming threat from China.
Moviela
Ric Wernicke 6
Is this the same Bank of America that stole money from children's bank books? Are they now trying to steal the equity of Boeing shareowners?

The world needs airliners for long thin routes. The 787 will prove profitable.
yr2012
matt jensen 1
The too big to fail bank is one of five that will steal your deposits when the next round comes along.
jbqwik
jbqwik 8
too much bottom-line angst stifles innovation
jdriskell
James Driskell 11
Big deal! It always costs something to make a breakthrough. Maybe Boeing won't make money on the 787-8, but I think its development will ensure that the follow-on aircraft will make money. The problem with an "analyst" is that they resemble drones (male bees) who produce nothing, flap their wings and make buzzing sounds.
SmokedChops
SmokedChops 5
Correct! How many months before Boeing saw an order for the 747? Many. Granted the 1970's were brutal to Boeing acrossed all platforms. But they bounced back. What is the backlog they are now sitting on? if they take now new orders for the 737 platform, it will still take several years to build out.
btweston
btweston 1
Without drones, there are no more bees.

Financial analysts have an important role to play, whether you like what they have to say or not.
chalet
chalet 4
It has been said over and over again: after the colossal stream of great successes that Boeing achieved since the late 50s (the 707, 727, 737, 747, 757, 767 and 777 programs) they grew conceded and unbearably arrogant to the point that they thought that they could never make any mistakes. The higher ups would nor accept criticisms from inside the Company pointing out what was going terribly wrong with the 787 program, and they are paying the consequences. Add to that Boeing would not listen to clients -airlines and the US Air Force as well- instead they "dictated" what they got to buy to fill their requirements, and that rubbed them the wrong way.
ColinSeftel
Colin Seftel 2
See also http://flightaware.com/squawks/view/1/24_hours/popular/54766/Boeing_s_32_Billion_Accounting_Question
RRKen
Kenneth Schmidt 1
https://flightaware.com/squawks/view/1/24_hours/popular/54925/Boeing_offering_voluntary_layoffs_to_workers_at_N_Charleston_plant
ALITALLA
ALITALLA 2
Boeing workers who built the 787 themselfs said that they would'nt fly on a 787!
chalet
chalet 3
The board made the blunder of blunders when they appointed Jim McNerney as its CEO who during its 10 year tenure made a lot of very expensive mistakes, they should have elevated Alan Mullly who had a stellar career at Boeing which included its mamoth success story: the 777 aircraft.
chalet
chalet 1
Correcting a type: the correct name is Alan Mulally
JD345
JD345 1
I don't get the article's math. It seems like they're assuming there's never going to be one more 787 order ever, which obviously isn't very realistic. I imagine the economics on the -10 are going to look a lot better than the -8 and -9. By 2022, airlines are going to be looking at replacing 772s and A330s that will be at or over thirty years old.
btweston
btweston 1
That's not what it's like what they're assuming. They are pointing out that it seems as though Boeing assumed much higher profits than they are realizing, and investors are taking notice.

Unlrss the SEC has some strange vendetta against Boeing, this is not good.
dwhyte888
David Whyte 0
It is a shame that such an informative platform has become more and more Airbus biased.
Report the news not your unwanted opinions!
btweston
btweston 3
You're going to have to explain that one. Bloomberg isn't making this stuff up. The SEC sure as hell isn't making this stuff up.
linbb
linbb 1
This forum is getting to be exactly that and then any little problem with a Boeing AC gets full attention. And by the way EU company's hide many of there problems by having the government pay for them. Not so much here in the US but that's manly why AB is still viable. They buy there own quite often to help there bottom line out if the truth was known.
SmokedChops
SmokedChops 0
it is more troubling that the work of a single "analyst" can cause this much havoc in the market. To Boeing; Build planes. Build them well. Innovate. Do not let an outside "expert" determine your course.
btweston
btweston 2
Well, that's not really how it works.
AlanBDahl
Alan Dahl 0
It should be noted that the analyst is talking “accounting” profit here, not actual profit. The more expenses Boeing can move to other programs (say a 797 that uses many of the new systems/techniques developed for the 787) the more “profit” Boeing can make on the 787, at least on paper.
jeffinsydney
jeff slack 0
Let's see?
This is how big investment and publicly traded companies work.

Invest a bucket load of shareholders money in a project that will advance your business but under quote to the board knowing full well a blowout will occur.

Develop the technology that will be industry changing and company changing and keep spending even though you are well beyond your budget.

Deliver this technology which comes with side technology and patents that will generate revenue.

Declare when technology is being rolled out and very successful that you have overspent.

The stock slides.
The company comes onto the stock market and buys back most of the shares that have just been thrown back on the market. This gives the stockholders more of their own company and at a very good price.
The shareholders benefit from their company; a that is going to make heaps from the developed tech, patents, and their own programs going forward all based on the tech.

Boeing shares will be worth a good 20% more on the next gen of planes and the company did it while playing the game.

It is all a game. Buy some Boeing shares you will not regret it.
Short term loss for long term gain.
8literbeater
8literbeater 1
This is exactly what I was thinking.
As for the fraud aspect; simply making a factual statement about the company's financial position doesn't sound illegal at all.
jdriskell
James Driskell 1
btweston
btweston 1
Sounds a lot like securities fraud. To quote the great Walter Sobchak, "That ain't legal, Dude."
joelwiley
joel wiley -1
I wonder how Airbus' numbers would compare using the same accounting rules and procedures as required for Boeing.

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