Morgan Stanley to Boeing: Your credibility is shot
Filed under: Company News, Morgan Stanley , Boeing
This morning, Morgan Stanley (MS) aerospace analyst Heidi Wood downgraded Boeing (BA) from "equal weight" to "underweight" -- cutting her price target from $50 to $43, according to The Seattle Times. Translation: Get out of this stock! Boeing, which reports earnings Wednesday morning, is down over three percent in later afternoon trading.
I spent hours talking with Wood for my book, You Can't Order Change, and more than anything else she said to me, the one thing that sticks in my mind was her first reaction when Jim McNerney took over in July 2005 as Boeing's CEO: "Don't f$%^ it up!"
And truly, McNerney has done just that. I have not spoken with Wood about this, but in her report she throws cold water on a statement by Scott Fancher, vice president and general manager of the 787 Dreamliner program which has a $110 billion backlog of 850 aircraft: "We continue to be on track to fly the 787 by the end of the year." In her view, the 787's first flight will be delayed into 2010 and she is even more concerned that "first delivery could be 6 months delayed to Spring 2011."
As Wood wrote, "We would not be surprised to see delayed first delivery and program ramp given scope of redesigns, weight overruns, high fuel burn, and high manufacturing costs." And after reports I received in August that the 787 was having problems with its Electrical System and its Environmental Control System, this latest bad news for Boeing comes as no surprise to me whatsoever.
Boeing has been working overtime trying to spin the media that everything is going to be just fine. But after missing six deadlines, it looks like Boeing is losing the credibility battle on many different fronts. Now Wood, who was a big McNerney supporter, must be regretting that support.
What remains to be seen is how much Wood's disappointment costs shareholders.
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.
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Reader Comments (Page 1 of 1)
10-20-2009 @ 5:33PM
TJ said...
Really? Not sure I understand why. You mean mis-management, failure to deliver, poor union contracts, more red tape and excuses than the Federal government is grounds to down grade their stock? I am sure that the management team at Boeing is shocked. I mean they only missed 6 deadlines.....
These people have run this, otherwise good, company into the ground.
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10-20-2009 @ 5:36PM
tom said...
Where is Mually? The savior is now the perceived wonder boy of Ford. The blame for this 787 fiasco should fall a large amount under his outsourcing leadership. Sure, you are fine with your compensation amount, as you told Washington.
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10-20-2009 @ 6:46PM
Ralph said...
Morgan Stanleys credibility is far below that of Boeing
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10-21-2009 @ 7:51AM
TONY said...
I do agree with you 100%, but the credibility for the rest of the big corporations are the same, all of them even Wall St. they have to do what the "Big Bosses" they told them what to do.
10-21-2009 @ 12:04AM
Scott Fettig said...
Morgan Stanley is a joke, they have 100's of crooked people working for them anyways Boeing was upgraded last week by a more reliable firm and price target of 67, I love when out of touch copanies try and downgrage successful ones, I'm buying more because of this article. Boeing will be a 100 stock again when Dreamliner takes to the air
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10-20-2009 @ 7:17PM
Bob said...
The new Boeing Dreamliner is Boeing's worst nightmare!
Most reminisicent of the US Navy Vanguard Missile, which was nicknamed the Civil Servent because IT WOULDN'T WORK, AND THEY COULDN'T FIRE IT.
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10-20-2009 @ 8:05PM
Frank Morrison said...
New technology is fraught with risk. I prefer a company that works to get it right before putting passengers in the air, in spite of pressure from airlines, investors, analysts, and pundits. The Comet's windows proved a stress point; they fell from the sky. Who knew?
I'd rather Boeing resolved the wing load stresses, then sold the planes whenever, for whatever. History suggests it will.
The 787 will be a long term moneymaker, because it won't fly until it is time to soar. The tanker deal will make a lot of money. Earlier management lost it twice. Current management will win it.
Buy, after the pundits drive the stock lower!
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10-20-2009 @ 8:29PM
summerof69 said...
funny i didn't notice in the report that airbus was kicking their azz in sales. guess they hope to keep that fact secret from the investors also...
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10-20-2009 @ 8:46PM
Steve said...
Untested new technology is a crap shoot. Betting the company on the 787 was not smart. McNerney wants to move the company to China. At least there, the government there will help him lie to the media. The board has made some big mistakes not promoting from within. McNerney must think he can patch the 787 with his scotch tape. Most of this can rest on Stonecipher and his friend Condit. Those 2 set the stage for this debacle long ago. Touting ethics and then being charged with ethics violations looks like the boardroom hypocrisy it is.
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10-21-2009 @ 4:53PM
hahahahaha said...
The problem is they sent to many of the old Engineers PACKING afew years back so they could get YES MEN in place and they did. The young guys look at this and say we can make it fly in the computer simulation and for many of them this is their 2nd airplane the 777 being the first. The older guys left from the hard core days keep their mouths shut to keep the job.
In a right now world you don't tell the general public you will have that new car ready tommorow and not have it ready they will move on and pass you by. What happens if some aircraft engine company comes out with retrofit engine that will give new life to the older airframes ? we all know what will happen new looks good but old will work if we can get more miles out of it.
They never should have brought in these none avaition guys to run a avaition company. If you look around we in the US are under a shortage of Aerospace Engineers and Electrical Eng. where will we get replacements from CHINA / INDIA thats getting to be a problem as these guys ship the knowledge back home. Copywrite and Security Issuses loom. Home grown is always better take the mass load of Technicians and send some back to College to complete the Engineering Programs HOMEGROWN.
Bean Counters Just Don't Get It this is not 3M and a Scotch Brite Pad its called AEROSPACE Manufacturing. Who is the right man for the job.
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10-20-2009 @ 10:51PM
Average White Boy said...
Why? What seems to be the problem. Just because they promised that the Dreamliner would be flying by now and it isn't, what's the big deal. The workers are having fun playing cards and taking four-hour lunches. If there is a problem with the Dreamliner, such as the wings might fall off in flight, you sure don't want to be flying in it, anyway. Boeing will continue to burn up investors cash and never get any results, but at least some people can keep their jobs. Invest more money into Boeing, maybe they'll get that Nightmareliner up in the air in 2013 if it catches a tailwind.
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10-20-2009 @ 11:17PM
Bear Hunter said...
That's what Boeing gets for trying to build an aircraft out of plastic. Then outsourceing most of the work. Like trying to put together a Chinese jig saw puzzle. What's the matter with metal airplanes ?
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10-21-2009 @ 12:25AM
Tech said...
Boeing is trying to move manufacturing and design to China so count me out. We've already lost concumer goods, cars, etc. and aerospace was one thing we had left but now? When the unions are flat broken, pay is third world, the dollar has been dropped to nothing and the world bank steps in loaning us some new currency we never will be able to pay off maybe Americans will make things again. Seeing how they plan to outsource another 40 million jobs to Chindia we still have a long way to drop but I'll invest my money in Aussie money, gold, silver, Australian resources, etc. not a former star of American industry being gobbled up by the Communist Chinese. It's David Rockefller's global economy and America is being broken.
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10-21-2009 @ 12:28AM
dirtbag said...
Corporate America is a bunch of sick s.o.b.'s that are only looking for a golden handshake/parachute , screw the product, give the stockholder a few bucks each year, downsize, show lower operating costs, get your big year end bonus before the company dies, bail out.........let the middle class suffer with job lose, no medical, loose their house, etc ........we are now a 3rd. world country and are
on greased skids going down hill faster and faster, we are now beyond the point of any return.....grab your spot under a good bridge because we'll all be living under one soon....
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10-21-2009 @ 1:17AM
tiix said...
What kills me is how some "B_ITCH" who is "NOT" an engineer and can't build a paper airplane, even know whats going on in a production floor to make such statments...she needs to be tared and feathered and thrown out with the dirty water
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10-21-2009 @ 1:31AM
Mike said...
I bet Foreskin Stanley sold a bunch of Boeing stock to 401K funds before the downgrade. Will buy it back after it goes down to peddle again at a later date.
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