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Next at Boeing: Playing catch-up
Eight-week strike puts company behind on delivering about 80 planes

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Published: 11/04/0812:30 am
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An eight-week strike that idled The Boeing Co.’s commercial airplane plants during a period of peak production may have delayed the delivery of as many as 80 planes, analysts said Monday.

The walkout, which ended Saturday after union workers ratified a deal with the company, also may mean the inaugural flight of its long-awaited 787 jetliner – initially expected by the end of the year – will not happen until February or March.

The Machinists union, representing about 27,000 workers in Washington, Oregon and Kansas, voted 3-to-1 to end the strike that began Sept. 6.

The walkout by electricians, painters, mechanics and other production workers paralyzed Boeing’s commercial plane business, which had been operating at full capacity with a record backlog of orders.

Boeing officials have said the standoff likely would result in a day-for-day delay of its production schedule, implying a two-month postponement of deliveries. The company plans to report delivery figures for October on Thursday.

The company, based in Chicago, routinely delivers about 40 planes per month, so the delivery of roughly 80 planes will have been postponed by the work stoppage, said Scott Hamilton, an analyst with Leeham Cos. “And then there’s the ripple effect that will be going on down the line,” he added.

Planes manufactured by Boeing, the world’s No. 2 commercial airplane maker after Europe’s Airbus, include 737s, 747s, 767s and 777s.

Boeing representatives have not indicated how many aircraft deliveries have been delayed. Company officials have said they plan to conduct an assessment once the Machinists union workers have returned. Some of the workers began trickling into Boeing plants Sunday night, and the full union work force is due back by Nov. 10.

“Before the strike began, we were running flat-out, so there isn’t much opportunity for us to catch up,” said Tim Healy, a Boeing spokesman. “We can’t work harder to make up the planes we didn’t make, so we’ve estimated there will be at least a day-for-day slide in our schedule. But we won’t know for sure until we get back up to speed.”

Figures posted on Boeing’s Web site show the company’s aircraft deliveries fell to 12 in September, down from 36 in August and the same number in July.

The time needed to resume pre-strike production levels remains unclear, though Boeing’s chief financial officer, James Bell, has said the company hopes it will take less than two months.

The walkout cost the company an estimated $100 million per day in deferred revenue.

Boeing and its suppliers already had fallen behind on production before the strike began, particularly for its 787 jetliner, said John Walsh, president of the consulting firm Walsh Aviation. Boeing has said the 787 promises greater fuel efficiency because of its construction from lightweight carbon-fiber composite parts.

“They may have benefited from a little bit of catching up, which would be hard to quantify,” he said, referring to Boeing’s suppliers, some of which slashed production because of the strike.

And the delay may not be entirely unwelcome by customers, he said, considering the global economic slowdown that could curb demand. “I haven’t heard anybody complaining bitterly about not having aircraft.”

Craig Fraser, an analyst with the ratings agency Fitch Ratings, said the strike outcome meant “they can get back to work on this very large backlog they have and, importantly, on the 787.”

“There are just too many labor stoppages, and it’s affecting their reputation in the market, and it’s something we will be watching going forward in terms of their credit rating,” he said.

Production at Boeing, Fraser said, was likely to be “flat-ish” over the next few years because of uncertainty in the market.

Shares of Boeing rose 43 cents Monday to $52.85.

Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
 

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