Boeing keeps making mistakes -- and paying for them
Oct 6th 2009 10:45AM
Updated Dec 4th 2009 4:26PM
When will Boeing's (BA) problems end? The latest setback: It has announced that it will take a $1 billion charge for problems with its next-generation jumbo jet -- the 747-8. According to the New York Times, those problems include design changes, insufficient engineering resources and an eight-week strike.
This reminds me of what Morgan Stanley (MS) analyst, Heidi Wood, told me about Boeing CEO Jim McNerney when he took over in 2005. At the time, Boeing was on a roll, and her thought about McNerney was: "Don't f@#$ it up!" Snafus like this $1 billion charge are just what she feared. The Times reports that $640 million of the charge is for higher costs to produce the 747-8, and the balance is for higher fixed expenses and "volume-based penalties to suppliers."
Since this is just another in a string of problems, I'm wondering even more whether Boeing can lure back current Ford Motor Co. (F) CEO Alan Mulally, who was president and CEO of Boeing Commercial Airplanes before moving to the carmaker. What problems? As I've posted, Boeing is also suffering from delays to its far more significant 787 program and a fairly weak hand in its effort to win a $35 billion bid for 179 airborne refueling tankers from the Pentagon.
I'm afraid that McNerney has disobeyed Wood -- which may explain why she downgraded Boeing stock in December 2007. And her comments last month to the Times suggest she is still feeling Boeing's burn.
Peter Cohan is a management consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter. He has no financial interest in the securities mentioned