Archive for Wednesday, January 28, 1998

BOEING REPORTS SETBACK

January 28, 1998

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Boeing posts $498 million 4th-quarter loss

Officials warn the company's troubles aren't over yet.

Seattle (ap) -- Boeing Co. reported a fourth-quarter loss of $498 million, or 51 cents a share, blamed on the costs of taking over McDonnell Douglas and production snarls in Boeing's jetliner assembly plants.

Company officials warned Tuesday that Boeing's troubles are not yet over, with continued production problems to solve and pressure to keep aircraft prices low. There also is uncertainty over whether Asian airlines will delay or cancel aircraft orders due to that region's financial crisis.

President Harry Stonecipher said Boeing, which employs about 15,000 people in Wichita, Kan., is in constant contact with its Asian customers concerning the region's economic problems. ``We are concerned about this matter.''

The fourth-quarter loss compares with a profit of $444 million or 46 cents a share on a diluted basis for the final quarter of 1996.

Boeing's sales for the quarter were $11.7 billion, up 17.5 percent from $10 billion a year ago. The higher sales were due to more deliveries across Boeing's product lines, including commercial jets, the company said.

Boeing stock rose 56.25 cents to close at $45 on the New York Stock Exchange.

Stonecipher said there have been no jet order cancellations because of Asia's financial woes, and none is expected this year. However, he said ``we can reasonably expect'' 60 fewer deliveries to Asia through 2000.

Because of pent-up demand for aircraft in the rest of the world, Boeing should be able to sell those planes to other airlines, he said.

As previously announced, Boeing took a one-time charge of $1.4 billion to reflect the costs of its summertime merger with McDonnell Douglas. But the problems of increasing its jetliner production continued to take a toll.

``Our financial performance over the past six months has not been good,'' said Phil Condit, Boeing chairman and chief executive officer. ``However, our commercial production recovery plan is in place and on track and we're seeing very encouraging results.''

Boeing is attempting an unprecedented production buildup, from a low of 18 planes a month in 1996 to 47 a month by the middle of this year. Because of that, there have been shortages in raw materials and parts and productivity inefficiencies from adding thousands of new employees, Boeing said.

Boeing halted its assembly lines for 747s jumbo jets and new-generation 737s for a month last year to try to get out-of-sequence work back in order.

In the third quarter, Boeing reported a $696 million loss, and said production problems would cost Boeing $2.6 billion over the coming year. Of that, $1.6 billion was written off in the third quarter and an additional $200 million to $300 million in the fourth, Stonecipher said.

Boeing said its problems will continue into the first quarter of 1998, when aircraft deliveries will be somewhat lower than subsequent quarters of the year. The company said that in addition to trying to unsnarl its production lines, it needs to modify the first 28 737-700s to fix problems found in flight testing.

Boeing said, however, that it forecasts total revenues of about $55 billion for 1998, up from $45.8 billion in 1997.

For the year, Boeing had a loss of $178 million or 18 cents a share on revenues of $45.8 billion, compared with a profit of $1.8 billion or $1.85 a share on revenues of $35.5 billion in 1996.

The loss came even though Boeing delivered 374 commercial jets last year, 105 more than in 1996. Many of the additional planes were 777s, which Boeing makes less money on than other aircraft because they are new and startup costs have to amortized.

The $1.4 billion charge represents an inventory valuation adjustment for the Douglas Products Division, mostly because of the decision to discontinue the MD-80 and MD-90 aircraft models. Boeing will keep the MD-11 widebody and MD-95 short-range jet in production.

Boeing said it is still looking for ways to consolidate facilities and cut costs after the merger, including in its defense, space and information systems segments. The special charge does not include any costs that might be associated with such future decisions, it said.

For 1997, commercial aircraft accounted for $26.9 billion of Boeing's operating revenue, up from $19.9 billion in 1996. Defense, space and information systems brought in $18.1 billion, up from $14.9 billion a year earlier.

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