EVERETT – Big production increases are in the future at Boeing Co. plants in the Puget Sound area, and could include new models of Everett-built 747s and 787s, the company’s top executives said Wednesday.
The immediate past, however, is another story. The September strike by the Machinists union caused Boeing to miss deliveries on 30 jets and cost the company $1.5 billion in lost revenues.
| Boeing Co., profit and loss
A favorable tax audit settlement and improved production performance helped the Boeing Co. overcome money lost during the Machinists union strike. Boeing on Wednesday reported a third-quarter profit of $1.01 billion – more than double its $456 million profit in the same period of 2004. On a per-share basis, earnings grew to $1.26 from 56 cents. The increase came even through revenue fell 4 percent during the quarter to $12.6 billion. |
“We faced some challenges this quarter,” Boeing chief executive James McNerney told analysts and reporters Wednesday as the company announced its third-quarter earnings.
Still, he said, orders for the year are running three times ahead of 2004’s pace, and Boeing has a backlog of nearly $100 billion worth of planes to build for customers. To meet the demand, Boeing plans to increase production by more than a third in 2006, which could be just the first of several high-production years anticipated for the company’s commercial jet division.
“We haven’t lost an order because of the strike,” McNerney said. “The customers continue to believe in us and our products.”
McNerney and chief financial officer James Bell spoke as Boeing announced it had increased its profits in the quarter despite the revenue lost to the strike.
Boeing had a profit of $1.01 billion for the quarter, up from $456 million in the same period of 2004. On a per-share basis, earnings grew to $1.26 from 56 cents.
The International Association of Machinists’ strike means Boeing won’t hit its target of 320 jet deliveries for the year, Bell said. Boeing now plans on producing 290 jets in 2005, up slightly from last year’s total of 285.
That will go up sharply next year, however. Bell said the company plans to deliver 395 planes in 2006, and while the executives wouldn’t discuss specifics, McNerney hinted that 2007’s total will be even greater.
“There will be a sustained ramp-up over the next couple of years, then there’ll be the 787 on top of it, which will increase it again,” he said.
The new production could include some new models. McNerney said there’s “a very good chance” Boeing will soon launch its proposed next-generation jumbo jet, the 747 Advanced.
“We’re hopeful that we’ll have the airline commitments in place by the end of the year,” he said.
Boeing also continues to talk about a larger version of the 787 with a few interested customers, and if there’s a market for it, Boeing will build it, McNerney said.
Next year’s total will include “a couple” more Everett-built wide-body jets, Bell said – the result of increased orders for the larger planes and the fact that some due for delivery this year were pushed back because of the strike.
McNerney defended the contract settlement with the Machinists that ended the 28-day strike, calling it a “responsible settlement for both sides” and one that “remained within the requirements of our No. 1 negotiating principle,” which was improving the company’s competitiveness.
McNerney and Bell found themselves on the defensive from analysts, who asked why Boeing isn’t moving faster to reschedule deliveries pushed back by the walkout.
Boeing already is moving “aggressively” to increase production, and “it’s an enormous effort to do that,” McNerney said. “It’s difficult in that environment to quickly replace 30 airplanes.”
The biggest challenge, McNerney said, will be managing the ramp-up to avoid the kind of meltdown that forced Boeing to shut down its assembly lines in 1997 after it tried to increase production too quickly.
Boeing’s Puget Sound-area management team remembers that well, McNerney said.
“We are taking it very seriously, very systematically,” he said. “You can see it in our answers to the question ‘Why don’t you turn on a dime and replace the 30 airplanes?’ We’re going to work it through. Alan (Mulally, Boeing Commercial Airplanes chief) and his team are focused on it. They all lived through ‘97, and they don’t want to live through it again.”
Boeing’s Everett and Renton factories could be looking at a long stretch of busy years, the executives said.
The influx of new orders have come almost exclusively from overseas airlines, Bell noted. But at some point, the major North American airlines – which have been struggling financially and not ordering new planes – will rebound and start shopping for jets again. That, McNerney said, will prolong the up cycle.
Bell agreed. “We’re at a $100 billion backlog (and) the domestic full-fare carriers have yet to come back and yet to get into this marketplace.”
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
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