Boeing profits dive; Execs admit strike isn't the only production problem

The quarterly results Boeing announced Wednesday revealed big problems with jet production beyond the Machinists strike.

Boeing profit dropped 38 percent in the third quarter, hit not only by the strike that began Sept. 6 but also by a major supply-chain glitch: German supplier Sell was unable to deliver onboard galleys so that five to 10 wide-bodies couldn't have been delivered from Everett anyhow.

And on a teleconference to discuss the earnings, Chief Executive Jim McNerney also revealed that another major airplane program besides the 787 Dreamliner is in trouble: the 747-8 update to Boeing's iconic jumbo jet is costing more than expected and the delivery schedule is under pressure.

On the earnings call, Chief Financial Officer James Bell said the strike directly reduced net company profit by $260 million, or 35 cents a share. That was just between Sept. 6 and the quarter's end Sept. 30.

Operating profits at the commercial-airplane division were down about $350 million on a pretax basis.

The results also show Boeing's cash and liquid assets slashed by $3 billion for the quarter, due to the strike, 787 costs related to delays before the strike, and spending on several defense acquisitions.

Company spokesman Todd Blecher said the hit to Boeing's cash position that can be directly attributed to the strike's impact during September is slightly less than $1 billion. Boeing ended the quarter with $7.2 billion in cash.

The galley glitch was responsible for 25 cents a share or about $185 million in net corporate profits and reduced the commercial unit's pre-tax reduction operating profits by about $250 million.

Boeing said that its supplier Sell is now "making good progress" and the galley problem should be under control after the strike ends.

Had the galley problem not existed, those wide-body jets would not have been delivered anyway due to the strike. So arguably the full strike impact on profit would have been $445 million in net earnings (or $600 million to pre-tax operating earnings).

On the 747-8, McNerney said "We're not particularly proud of how that is sorting out, but we'll get that program done. ... It suffered from a few misassumptions that we've caught up on now and we're going to get fixed."

Boeing reported net income of $695 million, or 96 cents per share, for the three months ended Sept. 30, down from $1.11 billion, or $1.44 per share, a year earlier.

Quarterly revenue, meanwhile, dipped 7.4 percent to $15.29 billion.

Without the strike, the company would have delivered 119 planes during the quarter, but instead delivered just 84.

Its backlog now stands at a record $349 billion. To date, 58 customers have ordered 895 new 787 Dreamliner jets.

In July, Boeing said it would conduct test flights of the plane in the fourth quarter. But Wednesday it said it would offer no further details on the plane's schedule until the strike ends.

Demand for new, fuel-efficient planes will secure Boeing's production schedule for through the end of 2009, at least, despite the worldwide credit crunch and economic downturn, McNerney said.

He said Boeing may need to finance some of its customers' airplane deliveries beginning in 2009.

Shares of Boeing slid $3.49, or 7.5 percent, to $42.91.

Information from The Associated Press is included in this report.