Strike, 747-8 Delays To Blame For Drop In Planemaker's Fortunes

The mighty have fallen. On Wednesday, Boeing told investors it lost $56 million in the fourth quarter of 2008... and said it plans to more than double the number of layoffs previously announced for 2009, cutting its workforce by 10,000 positions.

The loss contrasts sharply with the $1.03 billion profit Boeing posted for the same period in 2007. Quarterly revenues plummeted 27 percent to $12.7 billion, while operating losses came to $205 million.

The American planemaker blamed the bulk of its Q4 losses on the 58-day strike by the International Association of Machinists, which halted Boeing's production lines and prevented the company from collecting money on delivered aircraft.

"The progress we made in many areas of Boeing during 2008 was outweighed by the impact of the strike and our performance on some key development programs," said Boeing CEO Jim McNerney. "Our imperative going forward is improving execution where it needs to be improved, maintaining strong performance across all our production programs, and preserving our financial strength to grow in these challenging economic times."

McNerney also noted a costly redesign for its upcoming 747-8 freighter and Intercontinental passenger variant hit the planemaker's balance sheet hard, though not nearly as badly as the strike.

Boeing still made money in 2008, to the tune of $2.7 billion... but that's a 34 percent drop from a year earlier. Revenues slipped eight percent, to $60.9 billion.

Most troubling in Wednesday's report, however, was the news Boeing plans to cut 10,000 jobs this year, as a slumping economy is expected to hit Boeing's sizable order backlog.

"The global economy continues to weaken, and it's affecting air traffic and financing," said Boeing CEO Jim McNerney. "We must prepare the company, including being more aggressive in terms of productivity."

Those job cuts will be made "through attrition, retirement and layoffs," McNernery added. As ANN reported, Boeing announced earlier this month it planned to cut 4,500 jobs by the end of 2008; the latest figure includes those earlier cuts.

Despite the slump, Boeing expects "continued growth" in its commercial aircraft and defense segments. The company also boldly predicted Boeing's profits would return to 2007 levels shortly, as the company's operations normalize.

"The financial guidance continues to assume stable delivery levels for in-production commercial airplanes over the next several years, but also considers operational and market risks," the company said.

Boeing investors responded positively to that statement, as shares rose 2.3 percent Wednesday to just over $43. Analysts aren't so sure, though... especially as Boeing's assurances don't carry as much weight as they once did, due largely to numerous unmet promises on the troubled 787 Dreamliner program.

Analyst Peter Cohan, of Peter Cohan & Associates, told Bloomberg that Boeing "disappointed analysts on its results and outlook... It looks like things are going to get worse for Boeing before they get better."

FMI: www.boeing.com