Boeing Tallies Strike Losses, 747-8 Effect
Boeing estimates that the two-month strike staged by its machinists late last year cost it some $2.5 billion in cash–the single biggest factor in the fourth-quarter net loss of $56 million the company reported this month. As a result of the strike, Boeing Commercial Airplanes delivered 105 fewer airplanes than expected, resulting in a $6.4 billion drop in revenues.
Boeing also took a “reach-forward” charge of $685 million in the fourth quarter due to “late maturity of the 747-8 design [that] drove substantial changes for supply partners,” said company CFO James Bell. In November Boeing announced a six- to nine-month delay for the 747-8 freighter, now scheduled for first delivery in the third quarter of 2010, and a three- to six-month delay of 747-8 Intercontinental passenger model, now scheduled to reach the market in the second quarter of 2011.
Bell said that about 50 percent of the charges related to the “late maturity” of wing design, driving new load requirements into the fuselage and statement of work changes for the suppliers. About 15 percent related to a later than planned move of component manufacturing to lower-cost suppliers and another 10 percent came from design and load changes that resulted in reduced commonality with the 747-400, thus rendering obsolete some of the already procured systems inventory. Bell attributed yet another 10 percent to the effect of the supply-chain “issues” on Boeing’s internal production process. Finally, he said the remaining 15 percent resulted from a share of company pension cost increases assigned to the program.