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Strike, delays slash Boeing profits

Latest update : 2008-10-23

US aerospace giant Boeing blamed a September walkout by 27,000 machinists and supply problems affecting its new 787 airliner as it announced a 38 percent fall in third-quarter net profit.

US aerospace giant Boeing, buffeted by strike and supply problems and threatened by more delays with its new 787 airliner, announced a 38 percent fall in third-quarter net profit on Wednesday.

The group said net profit fell to 695 million dollars while earnings per share declined 33 percent to 96 cents, missing analysts' consensus forecast of 99 cents.

"Clearly, the results were affected by the machinists' strike, as well as by the supplier issues we face on the 787 program," said Boeing chief executive Jim McNerney on a conference call.

Boeing's 27,000 machinists, representing 16 percent of the company's workforce, walked off the job on September 6 in a dispute over new contracts, causing delays in production and deliveries.

The group, which is also a defense supplier, said the strike had reduced deliveries of third-quarter commercial airplanes by approximately 35 units and net earnings by an estimated 60 cents share.

The strike by machinists is estimated to be costing the company 100 million dollars per day. According to a running union tally, the 47-day-old strike has cost more than 4.6 billion dollars to date.

Third-quarter revenues fell seven percent to 15.3 billion dollars, from 16.5 billion dollars in the same period in 2007.

Shares in Boeing closed down 7.83 percent at 12.48 dollars.

As well as reducing revenue and profit, the strike risks further delaying the launch of Boeing's new commercial plane, the 787 Dreamliner, for which 895 orders have been placed by 58 customers.

Boeing has declined to discuss any further delays to the 787, a fuel-efficient mid-sized plane, saying only that an update will be given once the strike has ended.

"I'm hopeful we can find a way forward here, sooner rather than later," said McNerney during the conference call. "The economic environment is a reminder we have to respond quickly."

The company and the machinists' union have agreed to resume federally mediated contract talks Thursday.

"Boeing will provide updated financial guidance and an assessment of the schedule for its affected airplanes after the strike concludes," it said.

For the 787, the program "made progress during the quarter despite the labor strike," meeting "key milestones" including hydraulic system and landing gear tests and analysis of the structural integrity of the plane.

The first deliveries of the 787, initially planned for the first half of 2008, have been pushed back to the third quarter of 2009 due to production difficulties.

Other supply problems in the third quarter stemmed from a lack of finished kitchens for large aircraft, Boeing said.

For the defense sector, Boeing said it expected a slowdown in spending in the months ahead. Sales from defense increased 6.0 percent in the third quarter on a 12-month basis.

"Boeing expects total US defense spending growth to moderate, but is focused on improving the outlook for individual programs by keeping them operationally healthy," the company said.

Boeing's total order backlog totaled 349 billion dollars, a record, the company said.


Date created : 2008-10-23