By Bill Rigby - Analysis
NEW YORK (Reuters) - If you want to know what’s going on with Boeing Co’s (BA.N) new 787 Dreamliner, ask anybody but Boeing.
The U.S. aircraft maker has consistently been late acknowledging problems with its new high-tech plane, long after industry blogs and Wall Street analysts have blown the whistle.
The company generally declines to answer specific questions about the project and the sheer inaccuracy of its projections are eroding its credibility.
Boeing’s problems are starting to resemble the spiraling setbacks at rival Airbus, whose A380 superjumbo was two years late, throwing parent EADS EAD.PA into financial disarray and ending the careers of several executives.
On Wednesday, the U.S. plane maker finally faced up to the second major delay on the revolutionary, carbon-fiber aircraft, putting it about nine months behind its original schedule.
The announcement, only a month after Boeing executives assured investors everything was on track, was widely predicted by industry watchers.
The delay forced Boeing to concede it will not build 109 787s by the end of 2009, an ambitious promise that most analysts had already lost faith in.
Wall Street is now asking why the latest assurances should be any more reliable than the last.
“Another delay, with no revised delivery schedule, and no guarantee that there will not be further push-outs,” said Robert Stallard at Bank of America, in a research note. “(That) leaves Boeing investors in a difficult position.”
The latest delay caps a remarkable six months of unraveling for Boeing’s 787 program.
A gleaming shell of the first plane was triumphantly paraded in front of 15,000 employees and customers in July 2007, amid confident forecasts the first test flight would be in August or September. Boeing now says it will not fly until at least June this year, as it grapples with unfinished work from suppliers and bolt shortages.
Wall Street is now taking a “show me” stance on the company, whose shares have plummeted since last summer.
“Boeing is likely to remain under pressure until they can hit at least one of their public milestones on the program,” said Myles Walton at Oppenheimer & Co.
The company’s stock performance reflects the loss of confidence. The shares are down 26 percent from their all-time high last July, before the 787 schedule started falling behind.
Some analysts say the dip is a good time to buy shares, but more rate Boeing stock a “hold” until uncertainty clears.
“Investors are likely to require clear signs that this is the last of the delays, which will take some months to prove out,” said Heidi Wood at Morgan Stanley.
Boeing is starting to feel the heat.
“We know our credibility is being tested on this program,” said Scott Carson, the chief of Boeing’s commercial plane unit, on a conference call on Wednesday. “We will pass this test.”
But given the complexity and necessary secrecy of the program, Boeing is struggling to point to concrete achievements that are moving the plane along.
The head of the 787 program, Pat Shanahan, spoke of “demonstrated performance” on certain areas of the plane on Wednesday, but did not go into specifics, leaving the question of Boeing’s credibility still largely a matter of trust.
Boeing attempted to defuse the credibility issue by withdrawing delivery targets for any 787s beyond the first one, now scheduled for early 2009.
Carson said the company needs to do more work before it establishes a new production schedule, based on “hard, assessed facts,” rather than “shallower analysis,” an acknowledgment that its previous projections were seriously flawed.
It was a painful moment for Carson and Boeing generally. Delaying the schedule was “a difficult call for us to make,” he said, on the conference call to analysts and reporters. “We don’t want to be in a position where we do all this with you again.”
Editing by Andre Grenon