Big Orders And Big Losses Record Sales Couldn’t Prevent Boeing From Taking A Third-Quarter Bath
Boeing Co.’s ongoing problems in producing commercial jets resulted in a whopping $696 million loss in the third quarter, despite record sales of more than $11.4 billion.
“Obviously, this is not a situation that we like,” Chairman Phil Condit told a news conference Friday after results were released.
But he said had he known what was ahead a year ago when Boeing began raising production rates, “we would have made the same fundamental decision,” because of strong customer demand for new planes.
Boeing had warned Wall Street earlier this week that it expected the loss, only the third quarterly loss for the aerospace giant in 25 years.
The loss amounted to 72 cents a share for the quarter. Boeing earned $466 million, or 48 cents a share, in the same period a year ago.
Revenue rose to $11.4 billion from $9 billion a year ago.
The results reflected combined operations from the merger of Boeing and McDonnell Douglas, which took effect Aug. 1.
Boeing’s stock dropped 62-1/2 cents Friday on the New York Stock Exchange, closing at $48.43-3/4.
Boeing blamed late aircraft deliveries, snarled assembly lines and shortages of parts and skilled labor for the loss.
Condit said two days ago that problems resulting from the production increases required to meet booming demand from airlines would cost Boeing $2.6 billion over the next year.
Of that total, $1.6 billion was written off in the third quarter.
Two weeks ago, Boeing announced that 747-400 production would be halted for a month and 737 production would be slowed to try to eliminate problems caused by trying to more than double the overall aircraft production rate.
On Friday, the company said $700 million of the third-quarter write-off resulted from production problems involving the new-generation 737s.
Boeing said decisions regarding restructuring, production and marketing plans for the division’s commercial aircraft programs may result in further write-offs or restructuring charges.
Condit said at the news conference that Boeing’s recovery plans are on track, with the 747 plan slightly ahead of schedule. He said production should be back to normal by the end of the year, but effects of the delays will be felt well into 1998.
He said Boeing expects to deliver at least 335 jets by year’s end, 10 fewer than hoped for earlier this year, but “we think we may actually be able to do a little better.”
The integration with McDonnell Douglas is on schedule, Condit said, and he hopes to announce on Nov. 3 Boeing’s decision on what Douglas aircraft it will continue to build.
The company is studying the future of the MD-80, MD-90 and MD-95 twinjets and larger MD-11 trijets, all of which are built at the Douglas Products Division in Long Beach, Calif. Sales of those aircraft have lagged far behind those of comparable Boeing models.
Boeing will be compensating customers for delayed deliveries, but Condit declined to say how.
For the first nine months, profit fell to $320 million, or 33 cents a share, from $1.4 billion, or $1.41 a share. Boeing’s sales rose to $34.1 billion from $25.5 billion in 1996.
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