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MrBretz
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Updated: Boeing to Consolidate 787 Production in South Carolina

Sat Aug 22, 2020 6:55 pm

Looks like all 787 production may move to NC. This is not a pleasant thought.

https://www.seattletimes.com/business/b ... -industry/

P.S. Sorry, SC not NC. And I lived in FL for a while and visited both states a fair amount.
Last edited by MrBretz on Sat Aug 22, 2020 7:13 pm, edited 2 times in total.
 
USAirALB
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 7:03 pm

Purely a political move. Production will not leave WA.

Also, SC not NC..

Why do people always mix up NC/SC? The RNC the other day had a posting describing Charlotte but used references the whole time to Charleston.
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flipdewaf
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 7:21 pm

USAirALB wrote:
Purely a political move. Production will not leave WA.

Also, SC not NC..

Why do people always mix up NC/SC? The RNC the other day had a posting describing Charlotte but used references the whole time to Charleston.

I got confused reading the article said ‘North Charleston, South Carolina’.

The article mentioned significant writeoffs if the WA plant closed, would/could Boeing Bury some of the production costs in the program accounting in this. Seems like a good time to slide away a financial problem when there is a media shitstorm going on.

Fred


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FrenchPotatoEye
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 7:25 pm

USAirALB wrote:
Purely a political move. Production will not leave WA.

Also, SC not NC..

Why do people always mix up NC/SC? The RNC the other day had a posting describing Charlotte but used references the whole time to Charleston.


Not politics alone.

787-10 can't be made in Washington. Only Charleston.

Also, demand is in gutter and boeing has many undelivered 787 jets too.

Sensible move under the covid world scene.
 
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 7:29 pm

Most interesting part to me was:

In addition to the job losses from the 787 going away, the cost of producing the 767s and 777s will shoot up because the overhead costs at the giant plant will then be spread over many fewer airplane deliveries.

Boeing will have to absorb much of that extra cost, especially on the 767 tanker program, which is a fixed-price contract. Boeing’s feasibility study will have to factor in such consequences, including possible big accounting write-offs.

Despite that, the former senior Boeing leader expects the financial drain from maintaining two low-rate 787 lines will force Boeing to “just bite the bullet and go to South Carolina.”

The article makes a lot of points about the various negatives, but they don't come close to the financial savings Boeing would get by moving all 787 production to KCHS. Getting out from having to pay for KPAE facilities and labor costs would goose the 787 program profitability, I would suspect. If they get to needing more than 8 per month, well, that's a classy problem to have, isn't it?

I find the discussion about worrying about future product development to be quaint. Who here doesn't think Boeing execs are going to worry much if all about what happens after they cash out?

The die actually was cast by 787 budget overruns that killed Y1 (a 737 replacement) and Y3 (a 777 replacement). We instead got MAX and 77X instead of all-new programs that could give the talent base something to really chew on. Now with COVID it's clear we won't see a clean sheet happen any time soon. I'd say best case is late 2020s.

If I was a Boeing airplane designer I'd really have to take a good look at what my career options are. A friend of mine was in the nuclear power plant design field in the 80s till he and a few of his co-workers in the mid 90s all decided they better consider what else they could do with their working lives since it was clear very few new nuke designs would get off the drawing boards. They all went back to night school and gained CompSci degrees and didn't look back. Same thing may be happening around KPAE I would think.
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2175301
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 7:58 pm

I think consolidation was always a long term given, although I expected it not to be considered for another 5-10 years.

I also expected that the NMA/797 would take over one of the production lines at the Everett Plant. With that being delayed and sent back to study in 2019 that may be a long way out now (especially with Covid-19).

The real question will be how much 787 demand is expected to bounce back in another year or two? I expect that an answer to that might not yet be known for another year.

It is appropriate that Boeing is studying the issue. I suspect that it won't be a quick study - they need to let things play out for most of another year to know the best answer.

Have a great day,
 
Spetsnaz55
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 8:57 pm

The study will be over end of septemeber. And this isn't just a political move. They will be moving SC and that was always their plan ever since SC plant opened
 
ikramerica
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 9:55 pm

2175301 wrote:
I think consolidation was always a long term given, although I expected it not to be considered for another 5-10 years.

I also expected that the NMA/797 would take over one of the production lines at the Everett Plant. With that being delayed and sent back to study in 2019 that may be a long way out now (especially with Covid-19).

The real question will be how much 787 demand is expected to bounce back in another year or two? I expect that an answer to that might not yet be known for another year.

It is appropriate that Boeing is studying the issue. I suspect that it won't be a quick study - they need to let things play out for most of another year to know the best answer.

Have a great day,

With 787 demand reduced, the case for a middle market aircraft is stronger in the future. The 787 production line being replaced with NMA line makes sense long term.
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Antaras
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 10:15 pm

Well I guess Qatar is screaming :crazy: :cry2: :hissyfit:
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lightsaber
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 10:19 pm

ikramerica wrote:
2175301 wrote:
I think consolidation was always a long term given, although I expected it not to be considered for another 5-10 years.

I also expected that the NMA/797 would take over one of the production lines at the Everett Plant. With that being delayed and sent back to study in 2019 that may be a long way out now (especially with Covid-19).

The real question will be how much 787 demand is expected to bounce back in another year or two? I expect that an answer to that might not yet be known for another year.

It is appropriate that Boeing is studying the issue. I suspect that it won't be a quick study - they need to let things play out for most of another year to know the best answer.

Have a great day,

With 787 demand reduced, the case for a middle market aircraft is stronger in the future. The 787 production line being replaced with NMA line makes sense long term.

Long term, I agree. The concern is getting through the near term. With all the other issues, I believe all production moves to Charleston to save money.

Everett will have to cut overhead, brutally. So will Charleston.

I look forward to the classy problem of demand exceeding more than 8 per month. I think the lowest cost option is to slightly expand Charleston. But aircraft demand lags passenger demand by 2 years. So we are discussing 2025 at the earliest.

I feel for everyone losing their job. Boeing must maximize cost cutting.

With Engineering in Washington, I expect the NMA to be produced there.

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United857
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 10:34 pm

If Boeing were to consolidate 787 production to one location, it would have to be in CHS not PAE. This is because the center section fuselages are produced at CHS and the one for the 787-10 is too long to fit in the Dreamlifter, necessitating that the CHS line be kept open.
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Re: Boeing Considers Closing 787 Production in WA

Sat Aug 22, 2020 10:36 pm

The faulty "stack 'em high and sell 'em cheap" Boeing business strategy for the 787 is now about to bite them in the tush. They were counting on linear demand for the type to continue deep into this decade, thus the 2-FAL's. However, most airlines that needed and wanted the 787 already have them in service (or parked), so the demand curve peaked last year and will be trending down, even after the COVID crash.

As for moving the whole 787 line to CHS, don't forget that many of Boeing's best airline customers complained bitterly about the poor QC of the planes coming off the CHS assembly line. The skilled labor pool in Charleston is much smaller and engineers being forced there from Seattle will probably be looking for other jobs, rather than move to a far less cosmopolitian city like Charleston. Labor is cheap in Charleston for a reason.

With this inevitable move, Boeing will find yet another way to hand signifcant future market share gains to Airbus. Why hasn't Boeing fired everyone in Chicago yet?! Boeing Chicago has piled one bad decision on top of another. They are being kept alive with debt. Yet those fools in Boeing's C-Suite still have their jobs?!
 
workhorse
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 12:00 am

Antaras wrote:
Well I guess Qatar is screaming :crazy: :cry2: :hissyfit:


I am afraid Qatar doesn't give a damn because it will be long years before they need new airplanes again.
 
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Antaras
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 12:34 am

workhorse wrote:
Antaras wrote:
Well I guess Qatar is screaming :crazy: :cry2: :hissyfit:


I am afraid Qatar doesn't give a damn because it will be long years before they need new airplanes again.

Well I'm afraid that QR would give a damn some years later. . .
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Antarius
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 12:45 am

FLALEFTY wrote:
The faulty "stack 'em high and sell 'em cheap" Boeing business strategy for the 787 is now about to bite them in the tush. They were counting on linear demand for the type to continue deep into this decade, thus the 2-FAL's. However, most airlines that needed and wanted the 787 already have them in service (or parked), so the demand curve peaked last year and will be trending down, even after the COVID crash.

As for moving the whole 787 line to CHS, don't forget that many of Boeing's best airline customers complained bitterly about the poor QC of the planes coming off the CHS assembly line. The skilled labor pool in Charleston is much smaller and engineers being forced there from Seattle will probably be looking for other jobs, rather than move to a far less cosmopolitian city like Charleston. Labor is cheap in Charleston for a reason.

With this inevitable move, Boeing will find yet another way to hand signifcant future market share gains to Airbus. Why hasn't Boeing fired everyone in Chicago yet?! Boeing Chicago has piled one bad decision on top of another. They are being kept alive with debt. Yet those fools in Boeing's C-Suite still have their jobs?!


Considering that Boeing dominates the midsize widebody market now, it's real easy to armchair QB their decision making AFTER covid happened and call it foolish. Covid was a black swan of black swan events.

Boeing wouldn't have been in the dominant position without being able to produce the 787 as fast and as cheap as they have.

So, yeah, hindsight is 20/20. Great input.
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 1:12 am

Revelation wrote:
Most interesting part to me was:

In addition to the job losses from the 787 going away, the cost of producing the 767s and 777s will shoot up because the overhead costs at the giant plant will then be spread over many fewer airplane deliveries.


The article makes a lot of points about the various negatives, but they don't come close to the financial savings Boeing would get by moving all 787 production to KCHS.


PAE is down to 2 777s and 3 767 a month after 747 shuts down (at 0.5 per month) and the 787 is consolidated to CHS. That is a lot of building to spread across 5 planes a month.

That will put 777 (and 767) on death spiral and PAE will end up like LGB - unless they develop a new product to build in good numbers (and why not expand CHS or build in Alabama for the new product?).
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 1:25 am

ADent wrote:
Revelation wrote:
Most interesting part to me was:

In addition to the job losses from the 787 going away, the cost of producing the 767s and 777s will shoot up because the overhead costs at the giant plant will then be spread over many fewer airplane deliveries.


The article makes a lot of points about the various negatives, but they don't come close to the financial savings Boeing would get by moving all 787 production to KCHS.


PAE is down to 2 777s and 3 767 a month after 747 shuts down (at 0.5 per month) and the 787 is consolidated to CHS. That is a lot of building to spread across 5 planes a month.

That will put 777 (and 767) on death spiral and PAE will end up like LGB - unless they develop a new product to build in good numbers (and why not expand CHS or build in Alabama for the new product?).


Everett can do more than just final assembly. Boeing has many sites in the Pacific Northwest beyond Everett and Renton. Portland, Puyallup (Fredrickson), Auburn, Kent, Seattle (Boeing Field), Mukilteo, etc have significant amounts of work.
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 2:09 am

ADent wrote:
Revelation wrote:
Most interesting part to me was:

In addition to the job losses from the 787 going away, the cost of producing the 767s and 777s will shoot up because the overhead costs at the giant plant will then be spread over many fewer airplane deliveries.


The article makes a lot of points about the various negatives, but they don't come close to the financial savings Boeing would get by moving all 787 production to KCHS.


PAE is down to 2 777s and 3 767 a month after 747 shuts down (at 0.5 per month) and the 787 is consolidated to CHS. That is a lot of building to spread across 5 planes a month.

That will put 777 (and 767) on death spiral and PAE will end up like LGB - unless they develop a new product to build in good numbers (and why not expand CHS or build in Alabama for the new product?).


Here's a thought...move the 737 to PAE and vacate Renton. It's terribly space constrained anyway. That would make the most of the enormous PAE facility, if there's enough room. 737 finishing is made from Boeing Field so they wouldn't need additional ramp space at PAE.
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 9:12 am

flipdewaf wrote:
The article mentioned significant writeoffs if the WA plant closed, would/could Boeing Bury some of the production costs in the program accounting in this. Seems like a good time to slide away a financial problem when there is a media shitstorm going on.

Fred



I always worried that the big program accounting numbers could hurt Boeing. Sure, if they kept the production rates high they could pay off the cost eventually, but everytime we were discussing this the numbers were only slowly decreasing compared with the overall number. Sure you could point to the buyback of shares and it could be argued the amount could have been written off already, because it is just a paper exercise, but it wasn't and the deferred cost still needs to be accounted for from future deliveries.

So the solution is 14 deliveries a month but Covid has smashed that to pieces. Now if the "best" solution is to shut down one line and go with one that can deliver 7 a month, what happens if you need or want to increase production again? Does this mean Boeing is expecting another rate cut or more cancellations? It's no good having your products sold out due to production restrictions as eventually if the competitor has space they will take orders from you.

But if that is the solution they go for, how bad is it to keep 2 lines when they are not at capacity? Your best option could hamstring you for years, so the assumption then is the other option will be even worse? That the solution to getting the program to pay back its paper debts hinged on an assumption that production levels would have stayed high for years seems like a very big risk.

So in summary, Boeing had to increase the accounting block massively to cope with the production costs they incurred at the start of the program. This was possible because they had the sales, but there also seemed to be a reluctance at the company to "pay off" these costs sooner and instead they bought back $40B in shares to prop up the share price. This was a risky strategy though as any slowdown would cause massive problems, but why does it seem like the same attitude that preceded the 2007-08 housing market crash reigned here, that there will always be future sales to increase the accounting block to and that production rates will always be high?

To realise the profits and progress the company has made on the 787 program they had to squeeze suppliers on cost. I think this is widely posted about on here and why the belief that the 787 is cheaper to produce than a A330neo is also common. But that only holds water if production rates stay high as well. So what pain is there for suppliers and how long before that reaches Boeing as well? How many companies are they going to have to purchase again and is this not what increased the cost on the 787 program that lead to all of this?

Is there any program that Boeing isn't in trouble right now? The MAX, well you know. The 767 has fixed price contracts and if they move production to SC on the 787 it will increase the cost of the 767 which means less profit or more losses. The 777X is delayed and production rates are at A330neo levels and airlines are still looking at deferrals added to the same cost problem as the 767. What hope is there for a new program when you will be trying to stem the bleeding at your existing ones?
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 2:09 pm

ADent wrote:
PAE is down to 2 777s and 3 767 a month after 747 shuts down (at 0.5 per month) and the 787 is consolidated to CHS. That is a lot of building to spread across 5 planes a month.

That will put 777 (and 767) on death spiral and PAE will end up like LGB - unless they develop a new product to build in good numbers (and why not expand CHS or build in Alabama for the new product?).

Yet keeping around people and machines to build up to 16/month when you are doing 6/month and most of those aren't being delivered is something that needs to be addressed. We probably won't see orders restart in five or more years. Once it restarts it'll be a long time before true demand hits 8/month, IMO.

Why five or more years? IATA has projected world travel will not return to 2019 levels till 2024. Lightsaber tells us it takes two years after passenger numbers recover for airlines to start ordering again. That pushes us out to 2026. We also need to factor in that the airlines already have young fleets and they aren't accepting delivery of new airplanes yet both A and B are producing 6 widebodies per month so supply is exceeding demand by 12/month. Then you look at collapse of some airlines that will mean plenty of young widebodies will be available cheap.

enzo011 wrote:
I always worried that the big program accounting numbers could hurt Boeing. Sure, if they kept the production rates high they could pay off the cost eventually, but everytime we were discussing this the numbers were only slowly decreasing compared with the overall number. Sure you could point to the buyback of shares and it could be argued the amount could have been written off already, because it is just a paper exercise, but it wasn't and the deferred cost still needs to be accounted for from future deliveries.

Yes, it is all a paper exercise. The production costs have been paid a long time ago, what hasn't happened is the accounting. Boeing can write it off any time they choose. Maybe one outcome of this exercise will be a write off. We should find out in a month or two.
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MIflyer12
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 2:24 pm

flipdewaf wrote:
The article mentioned significant writeoffs if the WA plant closed, would/could Boeing Bury some of the production costs in the program accounting in this. Seems like a good time to slide away a financial problem when there is a media shitstorm going on.

Fred


'Bury' isn't a precise use here. It would be acknowledging a loss - one that effectively occurred with previous deliveries and wasn't recorded at the time. 'Oops, there's $10(?) Billion that we didn't really earn as deliveries were made between 2011 and today.' When production winds down prematurely, or when assets are retired short of planned life, write-downs occur. See Airbus A380 production, Emirates A380, Delta MD-90, BA 744...

There was nothing inherently wrong with increasing the accounting block (decreasing the amount amortized per delivery) as new bookings and production/deliveries were increasing.
 
JayinKitsap
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 3:17 pm

Not the accounting block stuff again, and again, and again, and again.

Deferred production costs are already spent by Boeing, program accounting is basically allocating this over 1,600 airplanes (just by memory, don't crucify me if it is 1,500). Boeing has sold close to the accounting block. Each plane delivered has about $30M written off, reducing profit at that time. Technically, the 787 is in the red, but there is $30M of cash flow as Boeing pays Boeing this amount. It is unlikely this will be written off as long as the accounting block eventually gets delivered.

The harsh reality is the steep drop in the planes produced in Everett, even temporarily idling the 787 line here crushes the Everett workforce. But keeping both open running at very low rates means both sites lose lots of jobs. The number of manhours to assemble each plane is mostly constant, there are some increased manhours due to being less efficient at a lower rate. Consolidation to one FAL producing 6 per month has lower cost compared to 2 FAL at rate 3. It is going to happen as Boeing has to reduce every cost to the minimum to make it thru this.

In particular the 747 bays at Everett probably need a lot of work done on them. As the 747 line closes there will be a year or more of construction renovating the building. Spending $100M to do this with no time constraints makes sense. That provides a great space for a new program out 5 years from now, hopefully the NMA, but possibly the NSA with a revised EIS of 2028-29 time frame. There is a year or so before any decisions are made. It might be to just have hanger space for the other production.
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 3:56 pm

Well if we are on program accounting, I would expect an adjustment if and when 787 production is consolidated, after all, the accounting block is about how many a/c Boeing reasonable expects to sell. I think we all agree that Covid has affected the number, now we need the program accounting experts to weigh in on whether orders already placed but being cancelled or deferred indefinitely will force an adjustment in the number and thus an increase in the amount to be written off against each frame sold / delivered.
 
MEA-707
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 4:19 pm

enzo011 wrote:
flipdewaf wrote:
The article mentioned significant writeoffs if the WA plant closed, would/could Boeing Bury some of the production costs in the program accounting in this. Seems like a good time to slide away a financial problem when there is a media shitstorm going on.

Fred



I always worried that the big program accounting numbers could hurt Boeing. Sure, if they kept the production rates high they could pay off the cost eventually, but everytime we were discussing this the numbers were only slowly decreasing compared with the overall number. Sure you could point to the buyback of shares and it could be argued the amount could have been written off already, because it is just a paper exercise, but it wasn't and the deferred cost still needs to be accounted for from future deliveries.

So the solution is 14 deliveries a month but Covid has smashed that to pieces. Now if the "best" solution is to shut down one line and go with one that can deliver 7 a month, what happens if you need or want to increase production again? Does this mean Boeing is expecting another rate cut or more cancellations? It's no good having your products sold out due to production restrictions as eventually if the competitor has space they will take orders from you.


sadly I wouldn't worry at all if the 787 demand will ever structurally get above 7 a month again. They are really lucky if they can maintain 7 more or less between next year and 2035ish. Maybe a year with 140 orders will follow a year without orders. Even before COVID it was clear it would be madness to hold on to 14 or even 10 a month, with most major airlines like NH and UA completing their fleet, Hainan and Norwegian unable to put their orders into service and no major airlines left who would likely order many.
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 4:22 pm

MIflyer12 wrote:
'Bury' isn't a precise use here. It would be acknowledging a loss - one that effectively occurred with previous deliveries and wasn't recorded at the time. 'Oops, there's $10(?) Billion that we didn't really earn as deliveries were made between 2011 and today.' When production winds down prematurely, or when assets are retired short of planned life, write-downs occur. See Airbus A380 production, Emirates A380, Delta MD-90, BA 744...

There was nothing inherently wrong with increasing the accounting block (decreasing the amount amortized per delivery) as new bookings and production/deliveries were increasing.

I guess the point is that taking writeoffs is not all that unusual an event.

https://leehamnews.com/2019/11/05/boein ... ince-1996/ is an interesting article especially since it pre-dates the pandemic.

An interesting chart of previous writeoffs:

Image

And an interesting conclusion:

Regardless of the 737 MAX crisis, more accounting charges at Boeing aren’t a matter of if, but a matter of when. High profitability on the 737 program in previous years almost kept those charges under the radar. In the future, not so much.

Now we add in the impact on sales of the covid crisis, and the lost sales and reduced projection of future sales are going to have to be accounted for, one would think.

One section I found very interesting was a discussion of the 777X. It starts by saying that the entire VLA market was said to be 1200 frames and Boeing was expecting to get 700-800 sales, yet even pre-covid that seemed aggressive and 500 was more realistic. Now:

With the delivery delay and uncertainty surrounding the 777X certification campaign after the 737 MAX debacle, Boeing will almost certainly book a charge in the next few quarters.

However, the hammer will fall when deliveries start. Boeing will have to announce the accounting block and production rates. With demand lower than Boeing envisioned, both will be lower.

If Boeing produces three units per month, it could take several years for the production line to become cash positive. Like with the A380, there might be not enough demand for the production line to reach mature costs.

The lower demand will translate into higher average production costs than at the time of the launch in 2013. Since Boeing is spending at least $5bn to develop the 777X, a multi-billion charge in 2021 is possible, if not likely.

I can imagine this is one reason why Boeing was happy to push first delivery from 2021 to 2022. It's hard to argue the conclusion the article is suggesting, that a big write off is coming. The accounting rules say the accounting block has to be a realistic projection of future sales. It'll be very insightful to see what they chose to do.
Last edited by Revelation on Sun Aug 23, 2020 4:28 pm, edited 1 time in total.
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 4:25 pm

The underlying economics problem is that Airbus exists to build planes and hire Europeans, plus make a little profit. Boeing exists to make suits and Wall Street happy, and then build planes that are OK. I have used harsher terms, but they weren't acceptable. Boeing announcing an NMA and moving 787 production would probably keep both Seattle and Charleston happy, but I am not expecting that. See 2nd half of first sentence.
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Sokes
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 4:30 pm

JayinKitsap wrote:
Not the accounting block stuff again, and again, and again, and again.

And then you continue with your view of it.
Why can't the world be a little bit more autistic?
 
LCDFlight
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 4:33 pm

Hard feelings about labor have a lot to do with this. When you make a big stink, when bad times come, you will be out of a job.

Boeing is at a low point right now, but their future will be ok. Traffic will slowly recover, the MAX and 777X hard work is done, and in a year or two things should be calm and happier.
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 5:07 pm

ADent wrote:
Revelation wrote:
Most interesting part to me was:

In addition to the job losses from the 787 going away, the cost of producing the 767s and 777s will shoot up because the overhead costs at the giant plant will then be spread over many fewer airplane deliveries.


The article makes a lot of points about the various negatives, but they don't come close to the financial savings Boeing would get by moving all 787 production to KCHS.


PAE is down to 2 777s and 3 767 a month after 747 shuts down (at 0.5 per month) and the 787 is consolidated to CHS. That is a lot of building to spread across 5 planes a month.

That will put 777 (and 767) on death spiral and PAE will end up like LGB - unless they develop a new product to build in good numbers (and why not expand CHS or build in Alabama for the new product?).

are you kidding? The very last thing Boeing needs is another facility. the 737.757.767 .777.787 and 757 were all built in WA. now they build the 737,767,777,787. and 747 in Washington, with the 747 line winding down? There's room to plan the next 2 medium bodies. They'll have to clear the backlog of 737's as well and in that? they could move in the 797 and the 7x7 for whatever the '67 and/or the '57 replacement might be. Especially if they move the '87 line down to CHS in it's entirety. They don't need More. They need to clean up what they've got because they've got plenty! were I them? Some of those backlogged 737's? I'd move to some of the closed bases now in California Like Moffett Field and stand by for work as needed. From there they can move the airplanes to any of their temporary facilities to keep them until their delivery. With Hangar one now being reskinned and refurbished at Moffett? 10-12 737's could be parked Nose to tail and another14 placed along either wall parked wing to wing inside Hangar one not including the 24 that might be parked outside of just that one hangar. on the east side of the runway near Dock 2 and 3? there's room for another 60 airplanes. all within 2 hrs flying time of Seattle. Boeing could do just fine.
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 5:14 pm

Even with the fact that Boeing owns Boeing the deferred costs, writing off 16bn means the company is reducing its value by 16bn (on paper). Is there a possibility for Boeing (or any company in the US) to go bankrupt because the dept is higher than the equity. Right now Boeing accounts for 16bn in sales with future 787 deliveries. Writing them off by reducing the expected sales also reduces the value of Boeing (or better the 787 line) by 16bn. Same will happen with the 777X line. To many of these charges can not ve healthy in the next three years with current dept level, especially when the company is cash flow negative at the moment. Even delivering all the MAX next year (and i doubt that with the NTU and other airlines not willing or able to take them) it is hard to bring the company cash flow positive when no deliveries of widebodies happen and Boeing burns so much cash with the 787 line troubles that will continue next year.
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 5:48 pm

FluidFlow wrote:
Is there a possibility for Boeing (or any company in the US) to go bankrupt because the dept is higher than the equity

Possible of course but if that was the standard a large swath of corporations would be bankrupt. What really matters is are you able to pay your debts and are the markets willing to keep loaning you money as needed. Boeing's last trip to the financiers resulted in more cash than they asked for. We should probably not worry about this for a while.
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 7:17 pm

Revelation wrote:
FluidFlow wrote:
Is there a possibility for Boeing (or any company in the US) to go bankrupt because the dept is higher than the equity

Possible of course but if that was the standard a large swath of corporations would be bankrupt. What really matters is are you able to pay your debts and are the markets willing to keep loaning you money as needed. Boeing's last trip to the financiers resulted in more cash than they asked for. We should probably not worry about this for a while.


Yeah I know that Boeing has no problem getting loans etc. I am more interested if technical insolvency exists in the US and if this could be a problem for Boeing if they have to write down billions on the 787 and 777X lines.
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 8:14 pm

FluidFlow wrote:
Revelation wrote:
FluidFlow wrote:
Is there a possibility for Boeing (or any company in the US) to go bankrupt because the dept is higher than the equity

Possible of course but if that was the standard a large swath of corporations would be bankrupt. What really matters is are you able to pay your debts and are the markets willing to keep loaning you money as needed. Boeing's last trip to the financiers resulted in more cash than they asked for. We should probably not worry about this for a while.


Yeah I know that Boeing has no problem getting loans etc. I am more interested if technical insolvency exists in the US and if this could be a problem for Boeing if they have to write down billions on the 787 and 777X lines.



#1? I don't think Boeing Commercial is in any way in Danger. #2? Boeing commercial nor their Military sales would allow them to do anything beyond a write down on their stock as the Pentagon would not then let them out of contracts and DARPA would just come up with even More contracts to keep them solvent if not Dissolve BCA altogether. The intertwining of the company? Would not let them be taken Over by anything BUT another Prime US Defense contractor (or two) like Lockheed- Martin or Northrop- Grumman or somebody of that level. So? NO. None of that will happen!
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 8:42 pm

With the corporate offices being in Chicago, expanding the SC facilities does make a lot of sense. It's a much shorter flight from ORD/MDW-CHS. Or if they could get out of their lease in Chicago I'm sure the state of SC would give them a sweetheart deal on moving the headquarters.
 
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 10:06 pm

TTailedTiger wrote:
With the corporate offices being in Chicago, expanding the SC facilities does make a lot of sense. It's a much shorter flight from ORD/MDW-CHS. Or if they could get out of their lease in Chicago I'm sure the state of SC would give them a sweetheart deal on moving the headquarters.


However Boeing Commercial is not in Chicago.

"Boeing Commercial Airplanes, a business unit of The Boeing Company, is headquartered in Seattle, Washington and employs more than 60,000 people worldwide."

http://www.boeing.com/commercial/
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 10:27 pm

What about certain airlines not taking Charleston 787s due to supposed inferior quality, trash/tools left on board etc, if that was true.

Why can't the 787-10 be built in Washington?
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 11:34 pm

gdg9 wrote:
What about certain airlines not taking Charleston 787s due to supposed inferior quality, trash/tools left on board etc, if that was true.

Why can't the 787-10 be built in Washington?

The center fuselage of the 787-10 is made in Charleston and is too large to transport by rail or DreamLifter. The 787-10 can only be made in Charleston because of this constraint.

As to certain airlines suddenly finding lots of issues when cash flow is poor, we all have our opinions. Which is more costly, a normal aerospace FOD program or keeping open two sites? Unless the customer has it in a contract, it can be modified. The customer could also be forced to take 787s at the original contract pace from Washington, with the last examples made early; naturally, no forgiveness in payment timeline. I think a resolution could be found.

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Iloveboeing
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Re: Boeing Considers Closing 787 Production in WA

Sun Aug 23, 2020 11:42 pm

frmrCapCadet wrote:
The underlying economics problem is that Airbus exists to build planes and hire Europeans, plus make a little profit. Boeing exists to make suits and Wall Street happy, and then build planes that are OK. I have used harsher terms, but they weren't acceptable. Boeing announcing an NMA and moving 787 production would probably keep both Seattle and Charleston happy, but I am not expecting that. See 2nd half of first sentence.


If they just existed “to hire Europeans,” then they wouldn’t also be building planes in the US and China.
 
trex8
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 1:11 am

lightsaber wrote:
gdg9 wrote:
What about certain airlines not taking Charleston 787s due to supposed inferior quality, trash/tools left on board etc, if that was true.

Why can't the 787-10 be built in Washington?

The center fuselage of the 787-10 is made in Charleston and is too large to transport by rail or DreamLifter. The 787-10 can only be made in Charleston because of this constraint.

As to certain airlines suddenly finding lots of issues when cash flow is poor, we all have our opinions. Which is more costly, a normal aerospace FOD program or keeping open two sites? Unless the customer has it in a contract, it can be modified. The customer could also be forced to take 787s at the original contract pace from Washington, with the last examples made early; naturally, no forgiveness in payment timeline. I think a resolution could be found.

Lightsaber

How easy/difficult is it to send those sections a few miles down the road via I26 to the port at Charleston? Is there space to even load them closer to the plant off I526? Airbus send fusleage sections by sea to Mobile. And of course theres the A380
https://www.airbus.com/newsroom/stories ... twork.html
 
JohanTally
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 2:04 am

trex8 wrote:
lightsaber wrote:
gdg9 wrote:
What about certain airlines not taking Charleston 787s due to supposed inferior quality, trash/tools left on board etc, if that was true.

Why can't the 787-10 be built in Washington?

The center fuselage of the 787-10 is made in Charleston and is too large to transport by rail or DreamLifter. The 787-10 can only be made in Charleston because of this constraint.

As to certain airlines suddenly finding lots of issues when cash flow is poor, we all have our opinions. Which is more costly, a normal aerospace FOD program or keeping open two sites? Unless the customer has it in a contract, it can be modified. The customer could also be forced to take 787s at the original contract pace from Washington, with the last examples made early; naturally, no forgiveness in payment timeline. I think a resolution could be found.

Lightsaber

How easy/difficult is it to send those sections a few miles down the road via I26 to the port at Charleston? Is there space to even load them closer to the plant off I526? Airbus send fusleage sections by sea to Mobile. And of course theres the A380
https://www.airbus.com/newsroom/stories ... twork.html


Shipping the fuselage from CHS to PAE wouldn't work because you still have both plants even if CHS isn't a FAL. Right now logistics and labor costs favor SC but I expect a large labor battle looming. Originally CHS was just a supplier until Boeing bought them to simplify the supply chain and ultimately may become the only 787 FAL.
 
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 2:21 am

FluidFlow wrote:
Even with the fact that Boeing owns Boeing the deferred costs, writing off 16bn means the company is reducing its value by 16bn (on paper). Is there a possibility for Boeing (or any company in the US) to go bankrupt because the dept is higher than the equity. Right now Boeing accounts for 16bn in sales with future 787 deliveries.

Assets=equity+liabilities

There are plenty of people who can save, but not run a business.
There are plenty of people with the skill to do business, but no/ not enough savings.
There are hardly companies where debt isn't higher than equity, and that is good.

A 50 year old building may show with 1$ in the books, so in the US even negative equity is allowed. All that is required is a willing bank.
At least in Germany negative equity isn't allowed.
I believe the US system is better for business with strong growth and market disruptors like Tesla.
(The land of unlimited possibilities)
For established industries I feel at least 20% equity is good, I believe for most countries it can go down to zero, but not below.

Boeing has negative equity. On paper liabilities are higher than assets.
Deferred production costs show as asset in the balance sheet.
If they write it down, they don't need new credit. I assume that's what you mean with "Boeing owes the money to Boeing. But assets would show 16 billion less. Accordingly one has to deduct 16 billion from Boeing's equity.
As of 1Q20 equity is -9 billion $. It would go to -25 billion $.
True, it's a paper exercise.
I still wouldn't say " Boeing owes the money to Boeing ".

This all sounds very negative. However Boeing in the last quarters has changed it's assumptions in such a way that I find no more reason to grumble. Plus they have the defense business which keeps them over water.
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Gremlinzzzz
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 5:42 am

Revelation wrote:
ADent wrote:
PAE is down to 2 777s and 3 767 a month after 747 shuts down (at 0.5 per month) and the 787 is consolidated to CHS. That is a lot of building to spread across 5 planes a month.

That will put 777 (and 767) on death spiral and PAE will end up like LGB - unless they develop a new product to build in good numbers (and why not expand CHS or build in Alabama for the new product?).

Yet keeping around people and machines to build up to 16/month when you are doing 6/month and most of those aren't being delivered is something that needs to be addressed. We probably won't see orders restart in five or more years. Once it restarts it'll be a long time before true demand hits 8/month, IMO.

Why five or more years? IATA has projected world travel will not return to 2019 levels till 2024. Lightsaber tells us it takes two years after passenger numbers recover for airlines to start ordering again. That pushes us out to 2026. We also need to factor in that the airlines already have young fleets and they aren't accepting delivery of new airplanes yet both A and B are producing 6 widebodies per month so supply is exceeding demand by 12/month. Then you look at collapse of some airlines that will mean plenty of young widebodies will be available cheap.

enzo011 wrote:
I always worried that the big program accounting numbers could hurt Boeing. Sure, if they kept the production rates high they could pay off the cost eventually, but everytime we were discussing this the numbers were only slowly decreasing compared with the overall number. Sure you could point to the buyback of shares and it could be argued the amount could have been written off already, because it is just a paper exercise, but it wasn't and the deferred cost still needs to be accounted for from future deliveries.

Yes, it is all a paper exercise. The production costs have been paid a long time ago, what hasn't happened is the accounting. Boeing can write it off any time they choose. Maybe one outcome of this exercise will be a write off. We should find out in a month or two.
People keep saying that it is a paper exercise, but it really isn't.
 
FluidFlow
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 6:45 am

Sokes wrote:
FluidFlow wrote:
Even with the fact that Boeing owns Boeing the deferred costs, writing off 16bn means the company is reducing its value by 16bn (on paper). Is there a possibility for Boeing (or any company in the US) to go bankrupt because the dept is higher than the equity. Right now Boeing accounts for 16bn in sales with future 787 deliveries.

Assets=equity+liabilities

There are plenty of people who can save, but not run a business.
There are plenty of people with the skill to do business, but no/ not enough savings.
There are hardly companies where debt isn't higher than equity, and that is good.

A 50 year old building may show with 1$ in the books, so in the US even negative equity is allowed. All that is required is a willing bank.
At least in Germany negative equity isn't allowed.
I believe the US system is better for business with strong growth and market disruptors like Tesla.
(The land of unlimited possibilities)
For established industries I feel at least 20% equity is good, I believe for most countries it can go down to zero, but not below.

Boeing has negative equity. On paper liabilities are higher than assets.
Deferred production costs show as asset in the balance sheet.
If they write it down, they don't need new credit. I assume that's what you mean with "Boeing owes the money to Boeing. But assets would show 16 billion less. Accordingly one has to deduct 16 billion from Boeing's equity.
As of 1Q20 equity is -9 billion $. It would go to -25 billion $.
True, it's a paper exercise.
I still wouldn't say " Boeing owes the money to Boeing ".

This all sounds very negative. However Boeing in the last quarters has changed it's assumptions in such a way that I find no more reason to grumble. Plus they have the defense business which keeps them over water.


So short, in the US technical insolvency is no problem. I am just wondering if Boeing is by definition already technically insolvent as the liabilities exceed the assets by 9bn. Adding another 16bn to that would widen that gap a lot.

Now of course as long as there is cash to pay the dept all is ok and at least for the defense part the government will make sure that there will be money to keep the company alive but for the commercial division it does not look well on paper.
 
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 7:28 am

FluidFlow wrote:
So short, in the US technical insolvency is no problem...

Yes.
Accounting terms have different meaning in different countries:
-Cash flow is an important number in US accounting. It doesn't mean the same in other countries.
For a long time I was wondering why Americans on a.net always spoke of cash flow.
-Deferred production cost doesn't exist in some countries. To put it under assets sounds like a bad joke to me.
-Some countries allow negative equity, some don't.
-At least till 2012 German law had no equivalent to chapter 11. An insolvent company wouldn't be administered by the old management or owner.
I don't know how it's now.

Here people from different countries discuss in what really is a Babylonian language mix up.

The wikipedia article on insolvency is interesting.
Why can't the world be a little bit more autistic?
 
FluidFlow
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 8:08 am

Sokes wrote:
FluidFlow wrote:
So short, in the US technical insolvency is no problem...

Yes.
Accounting terms have different meaning in different countries:
-Cash flow is an important number in US accounting. It doesn't mean the same in other countries.
For a long time I was wondering why Americans on a.net always spoke of cash flow.
-Deferred production cost doesn't exist in some countries. To put it under assets sounds like a bad joke to me.
-Some countries allow negative equity, some don't.
-At least till 2012 German law had no equivalent to chapter 11. An insolvent company wouldn't be administered by the old management or owner.
I don't know how it's now.

Here people from different countries discuss in what really is a Babylonian language mix up.

The wikipedia article on insolvency is interesting.


As far as I know, in Switzerland it is the same. If your liabilities are larger than your assets you have to declare bankruptcy.
 
Flying-Tiger
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 8:19 am

Sokes wrote:
FluidFlow wrote:
So short, in the US technical insolvency is no problem...

Yes.
Accounting terms have different meaning in different countries:
-Cash flow is an important number in US accounting. It doesn't mean the same in other countries.
For a long time I was wondering why Americans on a.net always spoke of cash flow.
-Deferred production cost doesn't exist in some countries. To put it under assets sounds like a bad joke to me.
-Some countries allow negative equity, some don't.
-At least till 2012 German law had no equivalent to chapter 11. An insolvent company wouldn't be administered by the old management or owner.
I don't know how it's now.

Here people from different countries discuss in what really is a Babylonian language mix up.

The wikipedia article on insolvency is interesting.


Chapter 11 doesn´t exist in Germany, however we´ve nowadays something called "Insolvenz in Eigenverwaltung". This effectively means that the old owners remain on board, however legal expert(s) for insolvency needs to be on board, too (mandatory requirement). It comes close to Chapter 11, but still works different.

In many European countries you can cummulate costs for development or construction sides in your balance without them being depriciated (e.g. "Anlagen in Bau" - plants / machinery under construction). This is meant to ensure that production assets only become a liability in your balance sheet once they are used as production tools, which I thnk is fair. However, once you start production there is no real way out from starting depriciation, which is solely based on time as far as I know. Thus no playing with accounting blocks or else (the time allowed for depriciation is set by the law makers).

Whilst I understand the idea of accounting blocks I am no big fan of these. They are too much a bet on the future, can be tailored to how it suits and creat risks on additional, unwanted depriciations, as we will likely see for the 787 soon. It has nothing to do with cash - this has been spent long ago - this has to do with assets, liabilities, bond ratings etc.
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Sokes
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 9:25 am

Flying-Tiger wrote:
...
In many European countries you can cummulate costs for development or construction sides in your balance without them being depriciated (e.g. "Anlagen in Bau" - plants / machinery under construction). This is meant to ensure that production assets only become a liability in your balance sheet once they are used as production tools, which I thnk is fair.

I understand what you mean, but I believe you use the word liability incorrect here.
You mean to say plant and machinery is only depreciated once production starts.
I believe this depreciation is a cost, not a liability.

I agree with the rest of your post.

In 2007 Airbus predicted 1283 VLAs will be needed.
That was quite optimistic considering B777-300ER entered service in 2004. What else could the management have said?
Imagine Airbus would have accumulated deferred production costs on the first 100 A380. :tombstone:
Why can't the world be a little bit more autistic?
 
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 10:29 am

Sokes wrote:
I understand what you mean, but I believe you use the word liability incorrect here.
You mean to say plant and machinery is only depreciated once production starts.
I believe this depreciation is a cost, not a liability.

I agree with the rest of your post.

In 2007 Airbus predicted 1283 VLAs will be needed.
That was quite optimistic considering B777-300ER entered service in 2004. What else could the management have said?
Imagine Airbus would have accumulated deferred production costs on the first 100 A380. :tombstone:


Indeed depriciations are booked as costs, nonetheless a deprication running for another 10 years is in principle a liability in your books, and needs to be looked on it as same from my point of view. You will have to live with these costs regardless if you produce 0, 1 or 100 or whatever figure, and either you book it as costs in these 10 years, or you need to book it all in one year (if allowed... not as easy as it sounds). Though this is probably not the exact wording the financial community would use for.

The way Boeing has booked these as deferred production costs is now coming back to haunt from my point of view, as they will need to do a special depreciation to put their accounting block assumptions back into realistic assumptions, not only in terms of longer-term market demand but reflecting the new (coming) cost situation, too. Though this is nothing which will have a direct impact on the decision of where the 787 line will finally end up, WA or SC. This is more an administrative excercice, which will inflict a very heavy minus onto Boeing´s annual results at one point in time. (Though not affecting the cash-situation directly; indicretly I assume it will raise interest costs for Boeing).
Flown: A319/320/321,A332/3,A343/346, A359, A380,AT4,AT7,B712, B732/3/4/5/7/8/9,B742/4,B752/3, B762/763,B772/77W,CR2/7/9/K,ER3/4,E70/75/90/95, F50/70/100,M11,L15,SF3,S20, AR8/1, 142/143,... 330.860 miles and counting.
 
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 12:27 pm

FluidFlow wrote:

So short, in the US technical insolvency is no problem.


If you were a natural person and technically insolvent, it would result in the instant removal of all security clearances. If they are technically insolvent, I wonder what the FAA/EASA will do, there is always a public perception that technically broke companies will cut corners.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
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gdg9
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Re: Boeing Considers Closing 787 Production in WA

Mon Aug 24, 2020 1:07 pm

lightsaber wrote:
gdg9 wrote:
What about certain airlines not taking Charleston 787s due to supposed inferior quality, trash/tools left on board etc, if that was true.

Why can't the 787-10 be built in Washington?

The center fuselage of the 787-10 is made in Charleston and is too large to transport by rail or DreamLifter. The 787-10 can only be made in Charleston because of this constraint.

As to certain airlines suddenly finding lots of issues when cash flow is poor, we all have our opinions. Which is more costly, a normal aerospace FOD program or keeping open two sites? Unless the customer has it in a contract, it can be modified. The customer could also be forced to take 787s at the original contract pace from Washington, with the last examples made early; naturally, no forgiveness in payment timeline. I think a resolution could be found.

Lightsaber


Thank you for that info, I didn't realize that regarding the center fuselage. I agree regarding two sites and customers 'finding' issues in their favor, as it were.
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Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos