"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Wednesday, January 16, 2008

Boeing 787 Dreamliner , further delays , Fitch itches, shares hold up, income will stutter

Sunday, December 09, 2007 and Lord Patel asked ... "Boeing 787 Dreamliner - is it turning into a nightmare ? " shortly after Lynn Lunsford had written in the Wall Street Journal ".."Boeing Scrambles to Repair Problems With New Plane" ..that post is still being quoted by the WSJ in their revies of the progress of the 787.

2 days later on Tuesday, December 11, 2007 Lord Patel reported on the 2 hour 787 Program Update Conference Call - Boeing 787 - everything on schedule as planned . Just over one month later the brisk optimism of Boeing is now exposed as ill judged.

CEO Scott Carson , along with Pat Shanahan, drafted in to get the program of the 787 Dreamliner back on schedule were upbeat, positive and convincing and dealt with savvy, straight probing by sharp bankers ...."The plan we announced in October for the 787 is unchanged: to fly the first airplane around the end of the first quarter of 2008 and begin deliveries in late November or December timeframe, and to deliver 109 airplanes in 2009," CEO Carson said. 'That is our team's commitment, and we intend to perform to that commitment." Oooooops !!!

Lord Patel concluded that post .."if asked to put a figure on the chances of them hitting the schedule - 70%. FUF's and "unk unk's" just keep getting in the way...and this is a mighty complicated piece of Lego."

Then after the Christmas tree came down, Lord Patel reviewed the FAA announcement about FAA type certificate requirements covering the digital systems architecture ...and it's "unusual and unique features". Which the OOH MY Gosh school of journalists world wide treated to ill informed scare stories ... Boeing Dreamliner could be vulnerable to hackers ...Boeing's new Dreamliner has serious security vulnerability.

Now in an evidently strained voice CEO Scott Carson of Boeing Commercial Planes (11 a.m. ET, 8 a.m. PT) has to tell us that the first flight of the 787 has been delayed from the end of the first quarter to "around" the end of the second quarter. More seriously "Power-on," a key milestone, has slipped to "March" instead of the original late January or early February. The Rolls Royce engines are ready to bolt on ... the delays are all down to the build.

Deliveries are now expected to begin in "early 2009" (?) , rather than late 2008 - a total now of one years delay. Boeing does not expect to deliver the planned 109 aircraft in 2009. In the Post about the 11th December 207 conference call we noted ..."A sharp lady from Credit Suisse nailed the major investors concern "can they meet the 6 a month rate of manufacture to hit the 109 by end 2009" a rate not met before on any other program" to which Pat Shanahan responded that .." (he was) confident that the new technology and the heavy capital investment will result in faster turnround in Everett." (Lesson Pat : Don't bullshit the bankers )

"challenged by startup issues in our factory and in our extended global supply chain." ... "experience on the factory floor completing production work on the airplane that was originally intended to be done by our suppliers" ...The Lego assembly problems appear to mount as the myriad global suppliers, delay delivery, deliver unfinished modules, costs mount, margins suffer, engineers are diverted from Boeing to their suppliersaffecting many in house programs ... and the blame spreads like jam on a peanut butter sandwich.

The prevuious delays, reasons excuses were said to be fasteners, now a major hold up relates (it is reported) to bigger bits. Global Aeronautica, a fuselage assembly center jointly owned by Alenia Aeronautica of Italy (a subsidiary of military technology company Finmeccanica SpA) and Vought Aircraft Industries of Dallas is the focus of worries. The companies' Charleston (S.C.) factory joins two 787 sections together. When joined, they are then flown as a single unit to Boeing's Everett (Wash.) final-assembly plant.

In the hot seat there, is Dennis Orzel 52, General Manager of the Turbine Module Center at Pratt and Whitney Aircraft Division of United Technologies who is VP, Manufacturing Operations of Vought Aircraft Industries Inc. since August 2006. He bigs up on their "Lean Manufacturing and Six Sigma as core strategies in driving operational improvements ", which he also relied on when at Exide technologies 2003/6. When we hear about "core strategies" we always think of Huckleberry Finn painting the fence .."there ain't gonna be no core"

On the news of this second delay Fitch ratings lowered its outlook of Boeing Co. to stable from positive .. "The additional delays, combined with previously announced delays, have reduced growth expectations for 2008 and 2009, and Fitch does not believe (Boeing)'s credit quality will improve sufficiently in the next 12 months to justify consideration for an upgrade of its credit ratings," Fitch said in a statement today.

Boeing are a superb engineering company (OK some dogs - that damned crashing Unmanned helicopter , the V22 Osprey / Turkey boondoggler) , the 737 range and the 777 are unparalleled, they can overcome the problems, and will.

However unceasing and unreasonable optimism and now a very public slow unravelling of production problems has damaged the reputation of both the company and those in charge. A weakness that you can be certain Airbus, revelling in the belated commercial success of the 380 will exploit... 1,341 net orders valued at S$157.1... delivered 453 aircraft, 19 more than in 2006, on time and to customer satisfaction announced today and more deliveries to Singapore of the 380.The first Singapore Airlines A380 has now accumulated over 130 flights and around 950 flight hours - and has the quietest cabin, is the greenest (20% fuel reduction ) long haul, lowest cost per seat mile with 527 seats in a standard 3 class configuration with stunning in flight entertainment.

Boeing shares have been falling all year (see chart) but reacted well to the news - hoping no doubt that all the bad news is out of the way.

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