It is hard to do business, make sales, and drive profits when your company is shut down by a strike. It also aids the competition.
Boeing Co. (NYSE: BA) is finding that out the hard way. According to Bloomberg, "Airbus SAS, starting its first aircraft assembly today outside Europe, said it may buy up to $1 billion of components from China by 2020, as the world's most populous nation may need 3,000 planes in the next 20 years."
By putting a plant inside China and offering to put money into the economy, Airbus is making best friends with the central government, a move that is almost certain to garner significant orders from the nation's commercial airlines.
Boeing management made a huge mistake by allowing its machinists to go out on strike instead of improving their compensation packages enough to keep the company operating. Boeing said that its margins could be hurt by the size of the deal the union wanted. The machinists knew better. They could see the size of the Boeing back-orders for products like the new Dreamliner going out for years and year driving higher and higher sales.
Each day that the strike goes on, Boeing risks losing more customers to Airbus. Management has not done the shareholders any favors.
Douglas A. McIntyre is an editor at 247wallst.com.
The fight between Boeing (NYSE: BA) and its machinists may go on a long, long time. While that may be bad for the union, it is much worse for Boeing. Its customers expect prompt delivery of fuel-efficient planes, especially the new Dreamliner. Boeing's management gambled on getting the union to knuckle under and lost.
According toThe Wall Street Journal, "As far as our members are concerned, we are in this one for the long haul," said Mark Blondin, aerospace coordinator and lead negotiator for the 26,800 machinists. The statement does not sound conciliatory.
Shareholders are getting the worst of it. Boeing trades at about $57, down from a 52-week high over over $107. With delivery delays, revenue is certain to drop.
Boeing's case with the unions is weak. The company claims it cannot give machinists a good three-year deal because earnings may not be strong that far out. With the company's tremendous backlog, it would be hard to imagine that being true.
Boeing's management will not be remembered well by history. They thought they had leverage in a situation where they had almost none.
Boeing (NYSE: BA) has been gambling that its machinist union would back down from further wage and benefit demands. Instead, according toThe Wall Street Journal,the aircraft company's largest labor union "voted to strike Wednesday night, but the union agreed to postpone a walkout for 48 hours after federal mediators urged both sides to return to the bargaining table."
If the employees walk, the delays in delivering the company's new Dreamliner flagship product could be pushed back again. The launch has already been postponed three times. Airline customers are mad enough that some are asking for compensation because Boeing has not hit its schedules.
Boeing's argument is that it cannot be saddled with high future labor costs. If its business slows down, its margins could be hurt. But the union members can read Boeing press releases. The company has a substantial back order of planes which should feed earnings for the next decade. Boeing is also saying that growth in the Chinese market could help support its business for the next twenty years.
Boeing can afford to pay the union members a bit more. It can't afford a strike.
Boeing (NYSE: BA) has been furiously negotiating with its machinist's union to avoid a strike vote by them that could come as early as September 3. Labor's greatest concerns is that Boeing has made a lot of money over the past several years, and workers have seen very little benefit from that.
According to Bloomberg, "The union says workers haven't had raises, except for cost-of-living increases, since 2004 and deserve to share in Boeing's $10.7 billion in profit since then." Boeing is taking the standard large company position: It cannot afford to sharply increase benefits without putting itself in jeopardy if its business slows.
Boeing might want to sharpen its pencil. A strike could cost it another delay for the launch of its new Dreamliner. It has already pushed back that date three times. Airline customers are so upset that some of them have asked for compensation. More delays could up the request for "damages" from carriers who still need the more fuel-efficient airplane.
The winner in a Boeing strike will probably be Airbus. It has had delays of some of its own products, including its huge A380 jumbo jet. But, most of those issues seem to be behind the European company. If Boeing can't deliver planes, Airbus can pick up market share.
Douglas A. McIntyre is an editor at 247wallst.com.
Airlines may not get the Boeing (NYSE: BA) Dreamliner on its new revised schedule after all. The plane has been delayed three times because of manufacturing and supplier glitches. If Boeing has problems with one of its unions, it might have to push back the launch date again. Some airlines are already asking Boeing for compensation for the late deliveries.
According toThe Wall Street Journal, "With its aircraft order books so full that some customers must wait as long as five years for deliveries, Boeing can ill afford a strike -- especially one that could further delay the rollout of its new 787 Dreamliner jet."
At the center of the negotiations are pay and pensions, making them little different from most such talks. But the solution for both sides could involve an incentive.
Boeing does not want to be faced with a strike that could hurt its revenue. The unions want a bigger piece of Boeing's sales pie. Boeing should return to the bargaining table with a simple proposal. If its new jets are delivered on time, wages will go up at a rate close to the union's requests. If not, the increases will be lower.
Boeing could set up a partnership with its labor force driven by the common goal of product launches. That is better than a strike that does neither the union nor Boeing any good.
Douglas A. McIntyre is an editor at 247wallst.com.
Boeing Co. (NYSE: BA) shares fell after the second-largest commercial plane maker reported disappointing second quarter earnings.
Net income dropped 19% to $852 million, or $1.16 a share, from $1.05 billion, or $1.35 a share, a year earlier, the Chicago-based company said in a statement. Revenue was flat at $17 billion. The results fell short of the $1.22 profit estimate and the $17.3 billion revenue estimate of analysts surveyed by Bloomberg News.
Boeing reaffirmed its 2008 earnings per share guidance of between $5.70 and $5.85 as well as its 2009 earnings per share guidance of between $6.80 and $7.00.
"While we faced some challenges this quarter that affected our results, we remain confident in our outlook for the remainder of this year and 2009," said Chairman, President and CEO Jim McNerney in the earnings release. "Strong global demand for our products and services, a record backlog, and a sustained focus on productivity improvement and execution will continue to drive growth and profitability for this company."
Boeing (NYSE: BA) Wednesday increased its 20-year forecast for global commercial jetliner deliveries for the sector by 2.8%, forecasting that demand for fuel-efficient replacement aircraft will outweigh capacity reductions by U.S. carriers.
Encompassing all airline manufacturers in the sector, Boeing now expects a market for 29,400 new commercial airplanes (passenger and freighter) by 2027, up 2.8% from its previous estimate of 28,600. Boeing added that the forecast factors-in the sector's near-term challenges, including a slowing global economy, surging fuel prices, slowing traffic growth in some markets, and a concerted action by airlines to lower costs.
Shares of Boeing (NYSE: BA) gained 25 cents to $66.18 on the news in Wednesday afternoon trading, despite a 131-point market sell-off in the DJIA.
Boeing added that single-aisle airplanes will make up the bulk of the sector's deliveries during the next 20 years. Strong domestic and intra-regional air travel growth in emerging Asia-Pacific markets, along with continued growth of low-cost carriers worldwide, is driving demand in this segment, the company said. Orders from Asia will comprise 31% of the deliveries; North America, 29%; and Europe/Asia, 27%.
The Boeing (NYSE: BA) 787 Dreamliner has been delayed three times, mostly because of problems with suppliers.The situation has gotten so bad that some of the company's customers, large airlines, say they will ask Boeing for compensation. That could cost Boeing a lot of money.
Boeing management has promised that there will be no more delays and that everyone who wants a plane will get one, on time. But, the best laid plans...
The company's large unions may stage work slowdowns. They argue that the work given to suppliers should have gone to them. They claim that delays could have been cut. Of course, now they want to delay the program further all on their own.
"Unions have the upper hand now,'' said Richard Aboulafia, an analyst with Teal Group, an aviation consulting firm in Fairfax, Virginia, told Bloomberg. "They're determined to get their share of the good times."
Boeing management now faces more criticism because its own labor force can't be held in line. The company's stock has already dropped due to the delays. First suppliers, now its own people.
The news shows that incompetent management usually stays incompetent. Boeing did not control its supply chain, and did not know it had component problems until too late. Now it will be accused of not even keeping tabs on its own unions.
Douglas A. McIntyre is an editor at 247wallst.com.
Reuters reports that German daily Die Welt quotes a customer letter saying that Boeing Co. (NYSE: BA) just announced the fourth delay in delivering its 787 Dreamliner. It was originally scheduled for this month but if Die Welt is right about the fourth delay -- which would affect deliveries scheduled for 2012 -- the 787 would now be 27 months behind schedule. But Boeing denies the report.
The good news as of now is that none of the 55 customers who ordered 787s -- creating a $151 billion backlog -- have canceled. Last month the CourierPost reported that the three initial delays would cost Boeing $4 billion cancellation fees. No word on how much this fourth delay will add to that cost -- if the report proves to be true.
But 2008 is turning out to be far worse year for aircraft orders than 2007 was. Both Boeing and Airbus have played down expectations for plane orders this year, after the record 2,754 orders between them last year. Most analysts are expecting about half that number this year.
The Boeing (NYSE: BA) 787 Dreamliner has been delayed for a third time and deliveries to airlines may not begin in earnest for a year. The news is bad for Boeing, but it is worse for some of the airline partners who were counting on a fixed schedules for getting the new plane into service. The Dreamliner flies farther, saves more fuel, and carries more passengers than many aircraft in service now.
Several airlines, including Qantas, New Zealand Air, Air India, and All Nippon will all ask for money because of the delays. According toReuters, "More than 50 airlines are waiting for 892 Boeing 787s, worth a combined $145 billion at list prices."
The news is very tricky for Boeing investors to assess. There is an excellent case that some of the airlines which expected the 787 this year and next have legitimate claims. Some might even argue that they can cancel their orders and buy a competing product from Airbus. The costs to Boeing could stretch into the tens of billions of dollars. But none of the airlines has made public the value of its damage request. Boeing also might elect to counter these claims, perhaps in court. Of course, being involved in a lawsuit with your largest customers is rarely a good idea.
One thing Boeing's shareholders can be sure of is that the mess is going to cost some money, and that usually moves a company's share price down.
Douglas A. McIntyre is an editor at 247wallst.com.
If Boeing (NYSE: BA) were writing for BloggingStocks:
We have a great article for you; the best you've ever read. It will save you a ton of money, bring back your youth, enlarge your penis or bust line, cure cancer, solve global warming, eliminate the national debt, provide jobs to all Americans, is family-values friendly, tastes delicious but is calorie-free, is hilarious without demeaning any race or sex, and will remain relevant for at least the next twenty years.
Unfortunately, posting of this article will be delayed due to a worldwide shortage of ampersands and the outsourcing of verbs to China. Look for this article in the first third quarter of 2008 2009, although we're happy to take orders (and prepayment) for it at any time.
Until then, you'll have to be satisfied with more of our same old bologna. But the article will be worth the wait. And don't pay any attention to those Europeans promising just as good an article. They don't even speak our lingua franca, do they?
The Associated Press reports that Boeing Co. (NYSE: BA) has announced that it will delay the delivery of its 787 Dreamliner again -- for the fourth time. Specifically, Boeing now expects to deliver in the fourth quarter of 2008 and it says it is building extra time into the testing schedule to reduce the risk of further delays. Delays for 787 could reach between 14 and 18 months from the original goal of September 2007.
I am working on a book about Boeing and I've found two schools of thought on the 787. One school thinks that delays of this nature are normal for an aircraft that uses so much new technology. Airbus has had multi-year delays with its A-380, for example. Another school of thought suggests that Boeing has regally mismanaged its relationships with its suppliers. It outsourced both the design and manufacture of the 787 to suppliers around the world. The idea was that the suppliers would produce all the parts and ship them to Boeing's factory in Washington state. Then Boeing would then snap the pieces together in a few days.
General Motors Corporation (NYSE: GM) and Ford Motor Company (NYSE: F) want to export more of their vehicles around the globe, and are getting a lift from new labor contracts and the weak dollar, which they believe will translate to bigger profits, the Wall Street Journal reported.
The Wall Street Journal also reported that former Fed chairman Alan Greenspan has been criticized for how he handled the economy before retiring two years ago, and is under attack for policies that many say started the current financial crisis.
OTHER PAPERS:
According to a person with knowledge of the matter, the Seattle Post-Intelligencer reported that The Boeing Company (NYSE: BA) is likely to announce a new delay of at least six more month for the 787 Dreamliner this week.
After the market close, the US military announced that it was giving its new tanker refueling contract to Airbus parent EADS and Northrop Grumman Company NYSE: NOC). The market believed that The Boeing Company (NYSE: BA), which has been supplying tankers for years, was a lock to get the deal.
The news is a stunning turnaround for Airbus since its planes will be adapted for military use. A year ago the European airframe company was in real trouble because of product delays. But, the tables have been turned recently. Boeing has been slow getting its new Dreamliner to customers. The plane has been delayed twice.
According toThe Wall Street Journal "Under the contract, the Northrop-led team will build up to 179 tankers based on the Airbus A330 jetliner." The deal is valued at $40 billion.
Shares in Boeing are down over 3% after hours and NOC is up 5.7%.
Douglas A. McIntyre is an editor at 247wallst.com.
It is hard to do business, make sales, and drive profits when your company is shut down by a strike. It also aids the competition.
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Here are some highlights from this past week's 
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Cramer on BloggingStocks: A fighting chance for the credit markets.
