Loss-making 747-8 hits Boeing results
Boeing today said it expects a pre-tax charge against third-quarter results of approximately $1.0 billion due to increased production costs and the difficult market conditions affecting its 747-8 program. Also, the first flight is delayed to early next year.
First delivery of the 747-8 Freighter is now expected in the fourth quarter of 2010. First delivery of the Intercontinental passenger variant remains scheduled for the fourth quarter of 2011.
According to Boeing, approximately $640 million of the charge reflects higher estimated costs to produce 747-8 airplanes at both Boeing and supplier facilities. As the program assembled major components of initial 747-8 Freighters during the third quarter, it became clear that late maturity of engineering designs has caused greater than expected re-work and disruption in manufacturing. This is resulting in additional resources being applied on the program and higher supplier expenses, which are the primary cost drivers.
The remaining $360 million of the charge relates to challenging market conditions and the company's decision to maintain the 747-8 production rate at 1.5 airplanes per month nearly two years longer than previously planned, deferring an increase to 2 per month. Higher allocation of fixed expenses and volume-based penalties to suppliers are the main drivers of the additional costs.