Aircraft maker Boeing posts loss, announces 10,000 job cuts
Written by Daniel Lovering
Jan. 30, 2009, Pittsburgh, PA - Facing weaker air traffic and pressure on military
budgets, Boeing Co. announced plans to cut 10,000 jobs after
reporting a surprise fourth-quarter loss this past Wednesday.
The Chicago-based company, which makes passenger, freight and
military jets, became the latest blue chip company to mirror a
slowdown in the world economy, as air travel wanes, airlines cut
costs, and the government shifts focus to construction spending.
Boeing, whose orders plunged in 2008 following three years of very
strong bookings, also announced a lower-than-expected earnings
forecast for this year.
``The global economy continues to weaken and is adversely
affecting air traffic growth and financing,'' Jim McNerney, Boeing's
chairman, president and chief executive, said in a conference call.
``We are also expecting pressure on defence budgets in light of the
economic recovery and financial rescue packages put forth by various
Boeing's job cuts include plans announced earlier this month to
eliminate 4,500 positions from its Seattle-based commercial jet
business. McNerney said Wednesday an additional 5,500 positions
would be slashed in other parts of the company, including its
defence division, which accounts for roughly half Boeing's revenue.
Boeing reported a fourth-quarter loss of US$56 million, or eight
cents per share, compared with profit of $1.03 billion, or $1.36 per
share, a year earlier. Results were dragged down by charges
totalling $1.79 per share, including the effects of an autumn labour
strike and delayed deliveries of new 747 jets.
Looking ahead, Boeing expects per-share earnings of $5.05 to
$5.35 for 2009, short of the $5.68, on average, forecast by analysts
polled by Thomson Reuters.
Revenue in the fourth quarter missed Wall Street expectations,
sliding 27 per cent to $12.68 billion. Deliveries of passenger and
cargo jets fell by more than half in the period, as a two-month
strike by production workers paralyzed the company's commercial
aircraft factories around Seattle. The strike, over wages and job
security, ended with a new contract in early November.
The work stoppage by 27,000 Machinists union workers forced
Boeing to shut down its factories and cost the company an estimated
$4.3 billion in revenue and $1.2 billion in earnings during the
Boeing failed to deliver about 70 planes during the walkout,
which began Sept. 6. In the last three months of 2008, Boeing
delivered just 50 commercial aircraft, down from 112 during the same
period a year earlier.
Boeing delayed deliveries of new 747-8 cargo and passenger jets
because of the strike, substantial design changes and limited
engineering resources to perform the work. McNerney said an
assessment of the problems, which cut fourth-quarter earnings by
$685 million, was not completed until earlier this week.
Deliveries of 737s, 747s, 767s and 777s also faced delays in the
quarter as Boeing replaced defective fasteners used to attach wiring
and other components inside the planes' fuselages.
Analysts polled by Thomson Reuters, on average, expected earnings
of 78 cents in the fourth quarter. Those estimates typically exclude
JSA Research analyst Paul Nisbet said the results were
``surprisingly poor,'' noting the unexpected charge for the 747-8
Last year, Boeing predicted it would earn $6.80 and $7.00 per
share for 2009 and said it and was on track to deliver between 500
and 505 planes, including 25 of its long-delayed 787 jetliners. The
initial test flight of the 787, built for fuel efficiency with
lightweight carbon composite parts, is scheduled for the second
This year, Boeing said it expects to deliver 480 to 485 airplanes.
The company's 2009 revenue outlook of $68 billion to $69 billion was in line with expectations.
Shares of Boeing edged up two cents to close at $43.24 Wednesday.
The stock's rise was less impressive than gains by other big
manufacturers. Their shares outpaced the broader market Wednesday as
President Barack Obama lobbied business leaders and the House of
Representatives to support an $816 billion economic stimulus plan.
The plan, considered likely to become law, includes money for
projects such as highway and bridge work, which is expected to boost
demand for steel, heavy equipment, commercial services and building
McNerney said Boeing had about six commercial plane order
cancellations and about 110 deferrals in 2008. The deferrals, he
said, represented about three per cent of its commercial plane
backlog, ``which is not out of the norm.''
``We do expect to see an increase in our deferrals in 2009,''
McNerney added. ``However, the size, diversity and quality of our
backlog provides greater flexibility than we've had in the past to
accommodate our customers.''
To date, Boeing said 58 customers had placed 895 orders for 787s,
excluding a recent cancellation by one customer for 15 of the planes
that had been scheduled for delivery late in the next decade.
The company, the world's No. 2 airplane maker after France's
Airbus SA, reported 2008 net income of $2.7 billion, or $3.71 per
share, down 34 per cent from 2007.
Still, Boeing's backlog grew eight per cent in 2008 to a record $352 billion.
``Despite this challenging environment, our backlog is holding,''
THE ASSOCIATED PRESS