The Boeing Co. reported fourth-quarter profits that beat analyst predictions by 9 cents a share Thursday and predicted higher 2013 earnings without a significant hit from the battery problems that have grounded its 787 fleet.
Boeing Chairman Jim McNerney told analysts that solving the battery issues that have kept 50 787 Dreamliners on the ground was the company’s “first order of business for 2013.” Those revolutionary planes have been ordered grounded after two fires, one in Boston and one in Japan, broke out in lithium ion batteries aboard two Dreamliners.
In the fourth quarter, Boeing reported net income of $978 million or $1.28 per share including one-time items. For the year, the company’s profits were $3.9 billion or $5.11 a share. Both of those profit figures were less than comparable profits in 2011. That decline was caused in part by one-time tax refunds Boeing received in 2011 but not in 2012.
The company said it expects net income of $5 to $5.20 a share in 2013, including one-time items. Most of that range is above the results the company achieved in 2012.
Some analysts have predicted the battery issues could cost Boeing between $350 million and $550 million in investigation, modification and compensation costs to airlines whose 787s have been grounded by regulatory authorities.
The company’s forecasts don’t include what Boeing said were “significant” costs for the 787 issues. Boeing didn’t define “significant.”
McNerney said he was constrained by the rules of the investigation regarding what he could say about the progress of the investigation into the 787 issues.
“We do believe good progress is being made toward narrowing down the causes of the problems,” he said.
Hundreds of engineers and scientists both within Boeing and with outside agencies are looking into the 787 issues, he said.
“We will get to the bottom of this and restore confidence in Boeing products,” he said.
The company’s financials showed Boeing has $13.5 billion cash on hand at the end of December, an amount that will give Boeing significant assets to deal with any costs with regard to the Dreamliner.
New developments in the 787 investigation show that Boeing and different airline operators had replaced at least 100 of the $16,000 batteries when they malfunctioned or were discharged too much to recharge. Both U.S. and Japanese investigators have not yet reported finding a definitive cause of the battery fires. Japanese said they found no problems at the Japanese battery maker. The investigation now appears focused on the battery monitoring system.
McNerney said the prior replacements of 787 batteries were because of maintenance, not safety issues.
U.S. investigators are asking for data on the performance of the devices after All Nippon Airways said it had replaced 10 of the systems on its planes.
ANA changed lithium-ion batteries or chargers on its fleet of 787s before a Jan. 16 incident in which one of the batteries smoldered and emitted smoke, prompting an emergency landing, airline spokeswoman Megumi Tezuka said in an interview Wednesday. The U.S. National Transportation Safety Board said it’s aware of reports of prior battery problems and is working with Chicago-based Boeing to study the batteries’ history since the 787 entered service late in 2011.
High-tech billionaire Elon Musk, CEO of electric car maker Tesla Motors, has said Boeing should have used smaller battery cells physically separated from one another rather than larger cells packed together to provide backup power for the plane. Larger cells create larger self-sustaining fires if they malfunction that can spread to adjacent cells.
“Nothing we’ve learned has made us think we made the wrong choice with the lithium ion battery,” said the Boeing chairman.
Boeing says it will deliver 60 787s in 2013. That less-than-expected delivery rate is due in part to more modifications that must be performed on early production 787s now being modified at the company’s Everett modification center.
Even with fewer 787 deliveries than some analysts had predicted, Boeing said it expects to deliver 635 to 645 aircraft compared with 600 in 2012. Just this week, Boeing ramped up the production pace at its 737 assembly line in Renton from 35 to 38 planes a month.
The company didn’t comment on the possibility of a strike by engineers and technical workers in its prepared remarks. Some 23,000 of those union workers are voting on the company’s “best and final offer” next month. Union negotiators are recommending rejection.
In post-presentation questioning, McNerney repeatedly refused to speculate on what effects the 787 issue might have on production.
“When we know the answer, we’ll know the answer and we’ll act on it,” he said.
McNerney said the investigation isn’t affecting research and development on the 787-9 or 737 Max aircraft that are the next products due to debut at Boeing. While Boeing is devoting considerable resources to the probe, that effort is well segregated from day-t0-day work on other programs, he said.
Meanwhile, Boeing is making good progress toward launching a modified 777 called the 777X with an enlarged body and composite wings.
“We’re getting close to that situation of offering the 777X,” he said.
Likewise, the company is moving closer toward launching the largest version of the 787, the 787-10, McNerney said.
Bloomberg News contributed to this report. John Gillie: 253-597-8663 john.gillie@ thenewstribune.com
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