Boeing takes $696 million quarterly loss Assembly line problems hurt airplane maker

October 25, 1997|By BLOOMBERG NEWS

SEATTLE -- Boeing Co. yesterday reported a third-quarter loss of $696 million, or 72 cents a share, after taking a $1 billion charge to cover assembly-line problems as it tries to build record numbers of airplanes.

Boeing stunned analysts and investors Wednesday when it lTC warned that it would have a loss for the quarter because of production inefficiencies, parts and supplies shortages, and overtime costs. The aircraft maker also said it expects to take another $1 billion in pretax charges next year, sapping earnings.

The Seattle-based airline maker said it has a plan in place that will help it boost plane production to 43 a month by the second quarter next year, more than double the rate of two years ago. Yet, Boeing's costs are soaring as it falls behind on plane deliveries and some assembly lines sit idle waiting for parts.

"Management cannot afford to blow the recovery, relations with customers and the confidence of shareholders," said Peter Jacobs, an analyst with Ragen MacKenzie. "For the sake of their own jobs, they can ill-afford to come back to customers and say they're still experiencing problems."

The loss shows that Boeing is being stretched as never before as it shoots to meet tight delivery deadlines. Complicating Boeing's problems is the push to absorb McDonnell Douglas Corp., the aerospace company Boeing bought last summer for $16.3 billion.

In fact, Boeing said its Douglas Products Division, formerly part of McDonnell Douglas, had a $100 million loss in the quarter. McDonnell Douglas was consolidated on Boeing's books for the first time in the latest quarter.

Another $700 million in third-quarter pretax charges stemmed from problems Boeing is having building the first of 400 737s.

With parts in short supply, some assembly lines have been halted. For example, earlier this month, Boeing shut its 737 and 747 assembly lines for about three weeks. Now the company says the stoppage will last about a month.

"Obviously, they are having digestion problems," said Bob Finch, an analyst at Aeltus Investment Management, a Hartford, Conn., investment firm that owned 1.9 million Boeing shares as of March. "But we've gotten the worst of the bad news and the order picture looks good."

Without the charge, profit from operations was $330 million, or 33 cents a share, compared to an average estimate of 40 cents, based on a poll of 12 analysts by IBES International Inc.

Revenue rose 27 percent to $11.4 billion from $9 billion.

Boeing stock fell 18.75 cents to $48.875 in trading of 14 million shares, more than the daily average of 4.53 in the past three months.

Pub Date: 10/25/97

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