By Sharon Terlep, Wall Street Journal, thanks to Frank Wright
Aircraft maker has slowed factory to fix quality problems after door-panel blowout
The jet maker reported a $355 million loss as revenue fell 8% from a year ago in quarterly results that were slightly better than expected. Under pressure from airlines and regulators to clean up its operations, Boeing has slowed its factories and has stopped providing most financial targets.
“Near term, yes, we are in a tough moment,” outgoing Chief Executive Dave Calhoun said in a message to employees. “Lower deliveries can be difficult for our customers and for our financials. But safety and quality must and will come above all else.”
Boeing is building fewer of its 737 MAX jets as the company weeds out quality problems at the Renton, Wash., factory that makes the planes. The company faces added inspections and heightened regulatory scrutiny following the Jan. 5 near tragedy. It delivered 83 commercial airplanes in the March quarter, a 36% drop from a year ago. The production slowdown of the bestselling planes means the company’s operations are burning cash. Boeing warned investors last month that it would take a hit of between $4 billion and $4.5 billion for the year’s first quarter, larger than it previously forecast. The company ended March with $7.5 billion of cash and investments, less than half what it had at the start of the year.
Meantime, Boeing faces a separate problem with its 787 Dreamliner. A shortage of some key parts means the company can’t increase production of the wide-body jets as quickly as it had hoped.
For the March quarter, the company reported an adjusted loss of $1.13 per share on revenue of $16.6 billion. On that basis, analysts had predicted an adjusted loss of $1.63 per share on revenue of $16.2 billion. Shares of Boeing gained 3% in early trading following the release of the latest results. The share price had slumped more than 30% so far this year.
The results come a month after Boeing announced Calhoun will exit at the end of the year as part of an executive shake-up. The head of Boeing’s commercial-aircraft business, Stanley Deal, stepped down and its board chair, Larry Kellner, won’t stand for re-election. Calhoun, in his employee letter, said the company is seeing results from efforts to improve quality.
“We are using this period, as difficult as it is, to deliberately slow the system, stabilize the supply chain, fortify our factory operations and position Boeing to deliver with the predictability and quality our customers demand for the long term,” he said.
On Tuesday, jet-fuselage supplier Spirit AeroSystems said Boeing would give it $425 million in advance payments to cover costs tied to Boeing’s quality-improvement efforts. Spirit’s factory in Wichita, Kan., made the fuselage involved in the Alaska Airlines door-plug blowout in January. Spirit now must make its own quality improvements, while dealing with inventory buildup as well as a new mandate from Boeing that jet fuselages must be defect-free before being shipped to Renton.
The deal on Tuesday comes as Boeing is in the midst of negotiations with Spirit about acquiring the company. The talks have dragged out amid negotiations with rival Airbus about control of Spirit factories that produce parts for Airbus jets, according to people familiar with the matter