By Alwyn Scott
Feb 5 Boeing Co expects its defense
business to continue facing a tough environment with "flatish"
profit margins, Chief Executive Jim McNerney said on Wednesday.
A recent federal government budget deal has pushed off
automatic spending cuts known as sequestration by two years, but
"sequestration has not gone away," McNerney said at a Cowen & Co
In contrast, the commercial jetliner business is better than
McNerney has seen it in his career, which includes time running
General Electric Aviation, the maker of aircraft engines.
Commercial aircraft business margins have room to widen, he
said, due to faster jet production and the ability to get better
prices from suppliers.
But he said it is a "fair criticism" that Boeing needs to do
more to help suppliers on engineering and process improvement
that will provide better prices.
He said about one-third of Boeing's suppliers are involved
in the company's "partnering for success" program, under which
they work together to reduce costs and share the benefits. The
remaining two-thirds are either in discussion or not engaged in
the program, he said. He said he expects the program to continue
to grow. "We have volume to offer and they have efficiency they
can offer," he said.
McNerney also acknowledged that Boeing is hiring contract
workers to help fix production problems at the 787 Dreamliner
factory in South Carolina, and that some work was being moved to
the Seattle area to be finished.
"We have traveled some work to Everett," he said, referring
to the location Boeing's main 787 assembly line. But he
characterized it as routine: "This is what we do all the time."
He also acknowledged there were "still some hard feelings"
with machinists in the Seattle area after an acrimonious
contract vote last month that ensured Boeing's new 777X jet
program would be located in Washington state. The contract
required machinists to give up their pension for a defined
Boeing's commercial jet business is not being affected by
weakness in emerging markets, McNerney said. But there is more
divergence among emerging countries and China and the Middle
East remain strong. Demand in the U.S. is improving, while a
pick up in Europe is "still to come," he said.
Boeing likely will announce new aircraft orders at an
upcoming airshow in Singapore next week, but not at the level of
the record orders announced last November, he said.