Boeing HQ
Today’s key stories focus on a snag in the Spirit AeroSystems acquisition, and how Boeing’s relationship with Wall Street analysts has ignored recent mishaps. Other stories focus on Boeing building up its federal lobbying as regulatory scrutiny intensifies, and how the 787 will see a smaller than plann.d production ramp due to supply chain issues.
The issue of whistleblowers and retaliation has reared its head, with the Boeing engineer’s union now becoming involved in two retaliation incidents. In an illustration of how criticism of Boeing has gone global, the French newspaper Le Monde has a story, in French, that translates to Boeing: The misguided notion of shareholder value can destroy what companies do best.
- Boeing’s cascade of mishaps fails to deter Wall Street backers – BNN Bloomberg
- Boeing bid for Spirit AeroSystems hits snag over Airbus assets – BNN Bloomberg
- Belfast plane maker focus of complex deal between Boeing, Spirit, and Airbus – Irish Examiner
- Bottom Line: Boeing builds out federal lobbying operation as scrutiny intensifies – The News Tribune
- Another Boeing plane will see slower production growth this year – Quartz
- Boeing : “La notion malavisée de valeur actionnariale peut détruire ce que les entreprises font de mieux” – le Monde
- Boeing retaliated against staff who raised concerns, union says – Bloomberg Law
The Bottom Line
The cards are falling into place for an interesting earnings call today. With the memorandum leaked earlier this week indication that production rate increases for both of Boeing’s cash cow commercial programs will be lower than expected, the financial community is expecting estimates revised significantly lower for 2024, which will likely begin with a significant first quarter loss, given that deliveries have been slow to begin the year. Questions on the executive transition, whistleblowers, the Spirit AeroSystems acquisition and other topics will undoubtedly be a part of the Q&A session with Wall St. analysts. We are expecting several potential downgrades of Boeing shares once first quarter results are posted.
Boeing does continue to grow its backlog, which now extends to more than five years of fully ramped production. Boeing’s problem has been its inability to deliver aircraft on time in sufficient quantities to meet its commitments to airlines. The result includes substantial penalty payments for deferred deliveries, which impact company margins.
With this comes a drain in free cash flow, just when additional investment is needed to complete the certification of the 777-X and the remaining two variants of the 737 MAX, the MAX 7 and MAX 10. Without those aircraft being certified and getting to the market on their revised, delayed schedule in 2025, Boeing will likely see orders begin to be cancelled or modified. Boeing, after years of managing to shareholder value rather than product quality, is paying the price with problems in virtually every major program. The challenge is getting steeper, and a new leader willing to change the corporate culture and metrics by which success is defined needs to be selected sooner rather than later. Boeing can’t wait until year end to replace Dave Calhoun.
