Facing falling air traffic and pressure on military budgets, Boeing Co. announced plans to cut 10,000 jobs after reporting a surprise fourth-quarter loss Wednesday.
The Chicago-based company, which makes passenger and military jets, became the latest blue chip company to mirror a slowdown in the world economy, as air travel wanes, airlines cut costs, and the government shifts focus to construction spending. Boeing, whose orders plunged in 2008 following three years of very strong bookings, also announced lower-than-expected earnings for this year.
“The global economy continues to weaken and is adversely affecting air traffic growth and financing,” Jim McNerney, Boeing’s chairman, president and chief executive, said in a conference call. “We are also expecting pressure on defense budgets in light of the economic recovery and financial rescue packages put forth by various governments.”
Boeing’s job cuts expand plans announced earlier this month to eliminate 4,500 positions from its Seattle-based commercial jet business. But McNerney said Wednesday an additional 5,500 positions would be slashed in other parts of the company, including its defense division, which accounts for roughly half Boeing’s revenue.
Boeing reported a fourth-quarter loss of $56 million, or 8 cents per share, compared with profit of $1.03 billion, or $1.36 per share, a year earlier. Results were dragged down by charges totaling $1.79 per share, including the effects of an autumn labor strike and delayed deliveries of new 747 jets.
Looking ahead, Boeing expects per-share earnings of $5.05 to $5.35 for 2009, short of the $5.68, on average, forecast by analysts polled by Thomson Reuters.
Revenue in the fourth quarter missed Wall Street expectations, sliding 27 percent to $12.68 billion. Deliveries of passenger and cargo jets fell by more than half in the period, as a two-month strike by production workers paralyzed the company’s commercial aircraft factories around Seattle. The strike, over wages and job security, ended with a new contract in early November.
The work stoppage by 27,000 Machinists union workers forced Boeing to shut down its factories and cost the company an estimated $4.3 billion in revenue and $1.2 billion in earnings during the quarter.
Boeing failed to deliver about 70 planes during the walkout, which began Sept. 6. In the last three months of 2008, Boeing delivered just 50 commercial aircraft, down from 112 during the same period a year earlier.
Boeing delayed deliveries of new 747-8 cargo and passenger jets because of the strike, substantial design changes and limited engineering resources to perform the work. McNerney said an assessment of the problems, which cut fourth-quarter earnings by $685 million, was not completed until earlier this week.
Deliveries of 737s, 747s, 767s and 777s also faced delays in the quarter as Boeing replaced defective fasteners used to attach wiring and other components inside the planes’ fuselages.
Analysts polled by Thomson Reuters, on average, expected earnings of 78 cents in the fourth quarter. Those estimates typically exclude one-time items.
JSA Research analyst Paul Nisbet said the results were “surprisingly poor,” noting the unexpected charge for the 747-8 jets.
Last year, Boeing predicted it would earn $6.80 and $7.00 per share for 2009 and said it and was on track to deliver between 500 and 505 planes, including 25 of its long-delayed 787 jetliners. The initial test flight of the 787, built for fuel efficiency with lightweight carbon composite parts, is scheduled for the second quarter.
This year, Boeing said it expects to deliver 480 to 485 airplanes.
The company’s 2009 revenue outlook of $68 billion to $69 billion was in line with expectations.
Shares of Boeing rose 2 cents to close at $43.24 Wednesday.
McNerney said Boeing had about 6 commercial plane order cancellations and about 110 deferrals in 2008. The deferrals, he said, represented about 3 percent of its commercial plane backlog, “which is not out of the norm.”
“We do expect to see an increase in our deferrals in 2009,” McNerney added. “However, the size, diversity and quality of our backlog provides greater flexibility than we’ve had in the past to accommodate our customers.”
To date, Boeing said 58 customers had placed 895 orders for 787s, excluding a recent cancellation by one customer for 15 of the planes that had been scheduled for delivery late in the next decade.
The company, the world’s No. 2 airplane maker after France’s Airbus SA, reported 2008 net income of $2.7 billion, or $3.71 per share, down 34 percent from 2007.
Still, Boeing’s backlog grew 8 percent in 2008 to a record $352 billion.
“Despite this challenging environment, our backlog is holding,” McNerney said.