Boeing in Trouble
posted by Nima
December 5, 2008 · Posted in Business
Marketwatch.com says Boeing may further delay 787 Dreamliner:
The online edition of The Wall Street Journal, citing unnamed sources, reported that Boeing officials are expected to announce later this month that first deliveries of the jet may not occur until as late as summer 2010.Development of the jet has been hampered by a strike by the International Association of Machinists and Aerospace Workers that “forced Boeing to shut down its Seattle-area assembly lines for almost all of September and October,” according to the report.In addition, the high volume of work on the project being outsourced has also created problems, according to the report.
In April of this year the story was:
“Our assessment for this delivery schedule is the culmination of detailed industrial engineering studies, on-site visits, partner negotiations … and at the end of the day, good old-fashioned management judgment,” Boeing’s Pat Shanahan said.
Boeing’s numbers show us the following:
- From 2005-2007 the company’s free cash flow (operating cash flow – capital expenditures) grew from $5.5 billion to $7.9 billion
- This year, so far, the company has generated a free cash flow of $389 million with the two past quarters yielding negative cash flows; unless the 4th quarter yields incredibly good results the overall free cash flow number for this year will look very bleak
- A look at the most recent balance sheet shows us that the company is among the highly leveraged ones with a 6:1 debt to equity ratio
- What stands out in particular that the company maintains an accounts payable balance of $27 billion versus a shareholders equity of $8.7 billion and a cash balance of $4 billion: the company is obviously making its vendors wait, the article above mentions that a lot of work is being outsourced
- Thus Boeing heavily depends on a lot of vendors that are (1) not being paid in a timely fashion and (2) will most likely not get paid anytime soon if the current economic trend hold up and the company keeps delaying deliveries and losing cash.
I am very bearish on Boeing and expect some seriously bad news for investors shortly. Surely Boeing will also be deemed “too big to fail” by US lawmakers. Obviously, the next step will be yet another bailout request.
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