Joni
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Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 5:20 pm

Boeing Co. (...) plans to pay $615 million to settle a U.S. Justice Department suit over procurement violations, according to a report on the Wall Street Journal's Web site on Monday.

http://tinyurl.com/l9k7y

How many 787s do they need to sell to cover that bill?

Let's see: the price per plane is USD130M, less discounts makes it, say, USD100M. Boeing is outsourcing more than half of the value (http://www.forbes.com/free_forbes/2006/0417/078.html), let's say 60%, so Boeing's revenue per plane is USD40M. Profit margins, estimate, are 7% so they make roughly 0.07 * USD40M = USD2.8M profit per plane, less taxes.

Not taking taxes into account, they have to sell about 220 B787s just to cover that settlement! IIRC Boeing's taxrate is very small at around 5% or so, so taking that further into account would push the number of B787s needed to 240.
 
Sangas
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 5:26 pm

Quoting Joni (Thread starter):
How many 787s do they need to sell to cover that bill?

What does this have to do with merits of the 787 program or the commercial aircraft division in general?
A camel only sees the other camels' humps
 
atmx2000
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 5:31 pm

Quoting Joni (Thread starter):
How many 787s do they need to sell to cover that bill?

Zero. The bill will be paid from existing cash flow, prior to EIS of the 787.

Quoting Joni (Thread starter):
Let's see: the price per plane is USD130M, less discounts makes it, say, USD100M. Boeing is outsourcing more than half of the value (http://www.forbes.com/free_forbes/2006/0417/078.html), let's say 60%, so Boeing's revenue per plane is USD40M. Profit margins, estimate, are 7% so they make roughly 0.07 * USD40M = USD2.8M profit per plane, less taxes.

Uh, Boeing isn't going to accept less than 10% margins on total 787 revenues. Companies don't outsource to become less profitable.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
Sangas
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 5:37 pm

Quoting Atmx2000 (Reply 2):
Zero. The bill will be paid from existing cash flow, prior to EIS of the 787.

This settlement may have little or no impact on earnings as well, because reserves have probably been made to cover all or part of this liability.
A camel only sees the other camels' humps
 
Joni
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 5:40 pm

Quoting Atmx2000 (Reply 2):

Uh, Boeing isn't going to accept less than 10% margins on total 787 revenues. Companies don't outsource to become less profitable.

Last year Boeing's margins in the commercial-plane division were only around 3%. I was assuming that since the 787 is a new product it would command better-than-average margins. (the year I just referred to might have been 2004 as well, I don't have time to check up right now)
 
Joni
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 5:41 pm

Quoting Sangas (Reply 1):

What does this have to do with merits of the 787 program or the commercial aircraft division in general?

Nothing, to my knowledge. I was just putting the extent of the settlement in some kind of perspective.
 
atmx2000
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 6:30 pm

Quoting Joni (Reply 4):
Last year Boeing's margins in the commercial-plane division were only around 3%. I was assuming that since the 787 is a new product it would command better-than-average margins. (the year I just referred to might have been 2004 as well, I don't have time to check up right now)

http://www.boeing.com/news/releases/2006/q1/060201z_nr.pdf

Full year operating margin is 6.3% for 2005. That included the effects of the machinist strike which reduced deliveries by 29 aircraft, or 10% of 2005 deliveries, and a $75 million charge applied to BCA due to sale of the Wichita operations. Without those factors, their margins would have been around 7% I estimate. Also, there were expenses related to termination of the 757 and 717 programs.

http://www.boeing.com/news/releases/2006/q2/060426a_nr.pdf

For Q1 of 2006, operating margins are 10% versus 8.2% for last year. They predict 9% operating margins for 2006, and 10% for 2007.
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Joni
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 6:52 pm

Quoting Atmx2000 (Reply 6):

For Q1 of 2006, operating margins are 10% versus 8.2% for last year. They predict 9% operating margins for 2006, and 10% for 2007.

Ok, then the 3% margins were in 2004 as I suspected (3,6%). Full-year margins for 2005 were 6,3%.
 
ltbewr
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 8:13 pm

They will probably make up this penalty by higher charges on military contracts  biggrin 
On a serious note, probably some more heads will roll from having to make this deal. This was very embarrasing to the company and was screwing the taxpaying citizens of the USA and elsewhere.
 
ABpositive
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 10:38 pm

What proportion of earnings would Boeing (or any aircraft manufacturer for that matter) be making from providing support and spare parts to airlines?
 
Joni
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RE: Boeing To Settle Federal Suits For USD615M

Mon May 15, 2006 11:17 pm

Quoting ABpositive (Reply 9):
What proportion of earnings would Boeing (or any aircraft manufacturer for that matter) be making from providing support and spare parts to airlines?

I'd venture that spare parts are sold, not provided.
 
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Stitch
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RE: Boeing To Settle Federal Suits For USD615M

Tue May 16, 2006 1:15 am

Quoting LTBEWR (Reply 8):
On a serious note, probably some more heads will roll from having to make this deal. This was very embarrasing to the company and was screwing the taxpaying citizens of the USA and elsewhere.

I imagine the head's of the Chairman and the CFO who oversaw the original deal will be considered sufficient.
 
PolymerPlane
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RE: Boeing To Settle Federal Suits For USD615M

Tue May 16, 2006 1:47 am

Quoting LTBEWR (Reply 8):
On a serious note, probably some more heads will roll from having to make this deal. This was very embarrasing to the company and was screwing the taxpaying citizens of the USA and elsewhere.

The margin on government's project is much higher than commercial business. It is not uncommon for business to go to capitol hill to lobby for their interests. I know it is screwing the taxpayers, but politics is dirty. Look at Haliburton in Iraq. They are making a killer money for providing logistics to US army. Now the oil company wants government money for their oil refineries damaged by Katrina. I am sure that Boeing is still going to get the contract from the the air force. Those politicians have to answer a difficult question from their voters if they give the contract to Airbus, no matter what. Especially Airbus is perceived as a French company.

Cheers,
PP
One day there will be 100% polymer plane
 
Joni
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RE: Boeing To Settle Federal Suits For USD615M

Tue May 16, 2006 4:21 pm