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Boeing targeting 10,000 job cuts

By Bill Rigby
/ Source: Reuters

By Bill Rigby

NEW YORK (Reuters) - Boeing Co reported an unexpected fourth-quarter loss on Wednesday and forecast 2009 earnings well below Wall Street estimates as it grapples with a dip in demand for its planes while airlines feel the pain of recession.

Expecting more plane order cancellations and uncertainty over the U.S. defense budget, Boeing Chief Executive Jim McNerney said he was targeting 10,000 job cuts this year, or about 6 percent of the company's total.

That includes the 4,500 job cuts announced by its commercial plane unit earlier this month, with the balance coming from Boeing's defense unit and corporate and support areas.

The plane maker, which is still struggling to recover from a two-month strike by its assembly workers last year, predicted a further dip in plane orders this year after handing back the title of biggest-selling plane maker to rival Airbus last year.

Boeing is likely to book fewer orders than the 480 to 485 deliveries it expects to make this year, said McNerney, a sign that the company is now firmly in a down cycle after a three-year plane sales boom. Last year Boeing booked 662 new orders. The year before it hit an industry record of 1,413 orders.

Boeing shares, which had fallen about 45 percent in the past 12 months, rose in early trading, but sank back 19 cents to $43.06 by midday on the New York Stock Exchange.

"The guidance could have been much lower if Boeing had forecast a more conservative build rate for commercial airplanes in 2009," said Macquarie Securities analyst Rob Stallard.

Boeing, which is based in Chicago, reported a quarterly loss of $56 million, or 8 cents per share, compared with a year-earlier profit of $1.03 billion, or $1.36 per share.

The loss was caused by the 58-day strike by Boeing's machinists union, which straddled the third and fourth quarters, cutting plane deliveries in both, along with extra costs on the delayed 747 and a one-time litigation charge.

Excluding the 747 costs and litigation charge, Boeing reported quarterly profit of 62 cents per share, below Wall Street's average forecast of 78 cents, according to Reuters Estimates.

Revenue fell 27 percent to $12.7 billion, largely because of the strike, which prevented the delivery of about 70 planes in the quarter.

For 2009, Boeing forecast earnings of $5.05 to $5.35 per share, well below the $5.74 expected by analysts, as airlines struggle to pay for new planes.

It expects delivery of 480 to 485 commercial planes this year. That number would have been much larger if Boeing had stuck to the original timetable for the new 787 Dreamliner, but the plane is now delayed by two years and has still not left the ground.

Boeing repeated its target to make the first 787 test flight in the second quarter of this year and first delivery in the first quarter of 2010.

Correcting problems with fasteners and incomplete work from suppliers on the 787 has gobbled up engineering resources at Boeing's Seattle-area plants. This has hurt progress on the new 747 jumbo, which is now also well behind its original schedule, and will not be delivered until late 2010.

Ailing airlines are adding to Boeing's woes, with many expected to defer or cancel orders outright as travel demand dips in the global recession.

Boeing said one unnamed airline had recently canceled a 787 order and that its Boeing Capital unit would have to provide financing for some purchases this quarter.

It said it now has 895 orders for 787s, as opposed to the 910 it reported at the end of December, suggesting orders for 15 planes have been canceled.

(Editing by Lisa Von Ahn, Dave Zimmerman and Matthew Lewis)