Despite reporting better than expected earnings, Boeing Co. executives left Puget Sound-area workers and observers puzzled about the company’s plans for the 737 and Renton.
After surprising the industry last week with its decision to refit the 737 with new engines, Boeing suggested on Wednesday that the company might not build the updated jet in Renton, where workers are gearing up for a series of production increases.
“We haven’t made the final decision where we’re going to produce the re-engine airplane,” said Jim McNerney, Boeing’s chief executive, during a call with analysts and journalists.
When asked whether Boeing would look to shift some 737 work to the company’s new site in South Carolina, McNerney said it would depend “on how competitive (South Carolina) could be as compared to Renton or another site.”
Boeing’s Machinists union isn’t putting much stock in the idea of building the re-engined 737 elsewhere. If the company plans to deliver the first 737 with new engines in 2017, then the only way to accomplish that goal is to keep the work in Renton, said Bryan Corliss, spokesman for the Machinists union.
“We don’t think Mr. McNerney is serious,” he said.
In fact, some executives for Boeing’s commercial airplanes division also didn’t seem to take McNerney seriously, making comments to The Seattle Times that seemed to back away from McNerney’s assertion.
Boeing spokesman Marc Birtel declined to clarify Boeing’s position on Renton, saying “no further comment will be made today on this.”
Later in the day, the company did issue a statement from Chicago saying, “The statements in the Seattle Times attributed to company spokespeople made after the company’s earnings call were neither accurate nor representative of the company’s or BCA’s position.
“The comments delivered this morning by Boeing Chairman, President and CEO Jim McNerney regarding the potential location of final assembly for the re-engined 737 stand as delivered. While Renton, Wash., logically would be our first location considered, no decision has been made, nor would one be made at this point in the program,” the statement said.
Like the Machinists’ Corliss, analyst Scott Hamilton, with Leeham Co., thinks the timeline for picking and developing a new site for the re-engined 737 would be tough. Boeing still needs its board to approve the decision to re-engine rather than develop a new jet. And the company likely would have to build a factory as well as train a workforce, depending on the site selected.
“Anything is possible, but it would be really challenging,” Hamilton said. Renton “is the lower-risk option.”
In picking another location, Boeing presumably would lower its manufacturing costs, he said. However, an inexperienced workforce could lead to the type of troubles Boeing has experienced with its 787.
Boeing’s decision in 2009 to place a second 787 assembly line in North Charleston, S.C., has the company in trouble with not only its Machinists union but also the National Labor Relations Board. The board alleges Boeing picked South Carolina not to reduce costs but to get back at the Machinists for labor strikes in the Puget Sound area, including a 57-day strike in 2008.
An administrative law judge in Seattle will hear argument Thursday about whether to keep some details of the case from the public as Boeing has asked. The Machinists oppose Boeing’s request.
The labor contract between Boeing and its Machinists union expires next year.
787 and earnings
McNerney confirmed the company’s plan to deliver the first 787 and first 747-8 freighter in the third quarter. The company anticipates receiving Federal Aviation Administration certification for both jets by the end of August, with deliveries to follow.
However, Boeing lowered the number of aircraft it expects to deliver in 2011, including the number of 787 and 747-8 deliveries. The company says it will deliver a total of 485 to 495 aircraft this year, with combined deliveries of 747s and 787s of 25 to 30. Boeing previously said it could deliver up to 40 747s and 787s and 500 jets in 2011.
Boeing chief financial officer James Bell indicated the company likely will deliver more 747-8s than 787s this year with first deliveries of both jets coming in the third quarter.
McNerney shrugged off press reports that Boeing will delay deliveries of its next 787 model, the 787-9, saying he’s not sure where that information came from. Two airline customers recently said Boeing will deliver their 787-9s later than expected.
Boeing saw its second-quarter profit rise 20 percent from a year ago. The company reported revenue of $16.5 billion for the second quarter, with earnings per share of $1.25. Analysts had predicted 97 cents per share.
Also on Wednesday, Boeing raised its 2011 earnings per share estimate to between $3.90 and $4.10 from $3.80 and $4.
“Our outlook for the year has strengthened as our team continues its relentless focus on productivity improvement, cash management and program execution,” McNerney said.
Boeing’s shares closed Wednesday at $70.63, up 47 cents.
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