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Ruscoe
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 7:50 am

Quoting travelhound (Reply 11):
The problem with the deferred costs is that we don't know what is and isn't included.

I admit to not having read all the posts, but Boeing could quite reasonably apply a lot of these costs to other programs, (if they wanted tp).

The wings of the 777X for instance, have benefited greatly from787 research and development and problems., as will the MOMK and NSA.

If you look back at the 707, Boeing had to develop it or get out of the race altogether, and from it has come the 727 737 and to a certain extent the 757.

The same can be said for the 787 whose lessoned learned in R&D, and production systems, will assist many programs in the future.

Those old enough will remember that similar things regarding development costs were said about the 707, and it certainly hadn't broken even when the 727 started production.
I don't know if it ever did,, but without it Boeing would not be here, same for the future if the 787 was not developed.
So whatever it cost, and even if it never breaks even, it was not just a new aircraft program but an investment in the future.
However imo it will break even at least and I expect it will sell more than 1300.

Ruscoe
 
sv11
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 8:28 am

I am not sure Boeing can reduce the cost of producing the 787 further, they are already at high volume rate. Another factor is that the a330 is probably selling cheap, that also puts pressure on price BA can get for 787.

Sv11
 
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Grizzly410
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 9:37 am

Quoting Ruscoe (Reply 50):
I admit to not having read all the posts, but Boeing could quite reasonably apply a lot of these costs to other programs, (if they wanted tp).

No they can't,    this is Deferred PRODUCTION Cost, nothing to do with R&D.
So unless you want other programs to copy a way of producing frame for more money than selling it that's not a good idea.
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scbriml
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 9:47 am

Quoting Ruscoe (Reply 50):
I admit to not having read all the posts, but Boeing could quite reasonably apply a lot of these costs to other programs, (if they wanted tp).

How? That's the whole point of program accounting, those deferred costs have been accrued by a specific program, in this case, the 787. The table in #48 shows it has, to the end of 1Q16, cost Boeing $28.651 billion to build and deliver 393 787s. They can't 'spread' that cost across other programs.
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Ruscoe
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 9:50 am

Quoting Grizzly410 (Reply 52):
No they can't, this is Deferred PRODUCTION Cost, nothing to do with R&D.

A lot of that cost has to do with production problems. I am aware that R&D is written off as it comes along, but they can take a leaf out of the Airbus way and convert it to an intangible asset, which to be fair some of it is.

Ruscoe
 
uta999
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 9:51 am

One wonders whether it was worth going down the CF route in the first place. A metal 787 would have sold anyway and been five years earlier, cheaper and more profitable.

It might have used 10% more fuel, but the saving simply was not worth it, for Boeing or the airlines.
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moo
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 9:57 am

Quoting scbriml (Reply 53):
How? That's the whole point of program accounting, those deferred costs have been accrued by a specific program, in this case, the 787. The table in #48 shows it has, to the end of 1Q16, cost Boeing $28.651 billion to build and deliver 393 787s. They can't 'spread' that cost across other programs.

They could write off the entire 787 program as an R&D expense for the 777X program...

That would be interesting to watch.
 
mjoelnir
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 10:29 am

Quoting RandWkop (Reply 43):

http://news.morningstar.com/all/dow-...g-makes-some-analysts-jittery.aspx

Another article which was originally behind a paywall on WSJ.

IMO Boeing is in deep shit. Not because the company has not potentials, but because of a management desperate focused on share price and market capitalization to the exclusion of all other factors.
Not enough that dividends are paid out on profits based on future earnings, but spending crazy amounts of capital on share buy backs. Instead of looking for a solid capital base, capital is burned like there is no tomorrow.
Equity seems to be a four letter word, better to have non. And one has to look at the fact that because of cost for program accounting a big part of the declared assets are nothing but thin air.

IMO Boeing should rather collect capital, like selling own shares, than buying them back.

Quoting Ruscoe (Reply 54):
Quoting Grizzly410 (Reply 52):
No they can't, this is Deferred PRODUCTION Cost, nothing to do with R&D.

A lot of that cost has to do with production problems. I am aware that R&D is written off as it comes along, but they can take a leaf out of the Airbus way and convert it to an intangible asset, which to be fair some of it is.

Ruscoe

And there the point is, when are production problems normal production cost? IMO Boeing, or rather the management of Boeing, went overboard booking problems on production cost rather than R%D. Every dollar you can move to early production cost will not impair your current profits and therefore share price and your bonus.
 
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speedbored
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 11:39 am

Quoting scbriml (Reply 53):
The table in #48 shows it has, to the end of 1Q16, cost Boeing $28.651 billion to build and deliver 393 787s.

Actually, it shows that those 393 frames cost $29bn more to produce than Boeing estimated as the average production cost for the accounting block. The actual cost of producing those 393 frames was probably closer to $50bn.
 
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par13del
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 11:52 am

Quoting scbriml (Reply 53):
They can't 'spread' that cost across other programs.

So a question, how is the cost of the building that the 787-8 paid for distributed to the 787-9 and 787-10, is Boeing able to sell them cheaper because their production cost only include specific items on a line but not housing space, electricity, plumbing, air conditioning etc etc etc that the building currently has and someone had to build and pay the construction personnel?
 
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scbriml
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 12:28 pm

Quoting par13del (Reply 59):
So a question, how is the cost of the building that the 787-8 paid for distributed to the 787-9 and 787-10

I don't think it matters because the deferred costs are for the whole 787 program, not specific models. All the costs to build any model of the 787, regardless of whether it's built in Seattle or Charleston, are counted in a single pot. It's much larger pot than my 'penny jar'!   
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mjoelnir
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 12:52 pm

Quoting par13del (Reply 59):
Quoting scbriml (Reply 53):
They can't 'spread' that cost across other programs.

So a question, how is the cost of the building that the 787-8 paid for distributed to the 787-9 and 787-10, is Boeing able to sell them cheaper because their production cost only include specific items on a line but not housing space, electricity, plumbing, air conditioning etc etc etc that the building currently has and someone had to build and pay the construction personnel?

You should not mix up investment, like building a production facility, with production cost like parts, labour and so on.
 
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moo
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 2:36 pm

Quoting mjoelnir (Reply 61):
You should not mix up investment, like building a production facility, with production cost like parts, labour and so on.


The building would be held under the "capital expenditure" category, while the production costs would be held under the "operational expenditure" category.
 
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Stitch
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 3:00 pm

Quoting jambrain (Reply 47):
I still can't get why B didn't increase selling price to get a positive margin when the backlog reached 350+ in 2006. (when they were still selling like hot cakes surely they could have asked for 10% more.

They did. The Average List Price for the 787-8 rose $7 million between 2005 and 2006. It went up another $15 million in 2007. That's an 11% rise between 2005 and 2007.
 
Aircellist
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 3:28 pm

Now that:

Quoting speedbored (Reply 45):
"Boeing during recent years has traded earlier cash payments for concessions like improved pricing or making changes to their orders."

plus that:

Quoting scbriml (Reply 48):
The 787 deferred costs table shows $32.418 billion at end 1Q16. Deferred costs increased by $141 million over 4Q15, but tooling and other non-recurring costs were down a bit.
Quoting scbriml (Reply 48):
An increase of $141 million while delivering 30 787s (of which only 6 were -8s) means an average 'loss per frame' of $4.7 million.

sounds very bad. And it becomes very logical that

Quoting speedbored (Reply 45):
Another quote that sticks out is:
"The company says it won't generate positive cash on each 787 delivery until late this year."
Wasn't that supposed to have already happened?

if they do indeed "improve" pricing on aircraft already sold (that is my guess from the wording). So,

Quoting scbriml (Reply 48):
I'm pretty sure they said the same thing last year.

(about generating positive cash) I'm pretty sure too.
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frmrCapCadet
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 3:59 pm

Quoting mjoelnir (Reply 57):

IMO Boeing is in deep shit. Not because the company has not potentials, but because of a management desperate focused on share price and market capitalization to the exclusion of all other factors.
Not enough that dividends are paid out on profits based on future earnings, but spending crazy amounts of capital on share buy backs. Instead of looking for a solid capital base, capital is burned like there is no tomorrow.
Equity seems to be a four letter word, better to have non. And one has to look at the fact that because of cost for program accounting a big part of the declared assets are nothing but thin air.

IMO Boeing should rather collect capital, like selling own shares, than buying them back.

While I often have wondered about some of your posts this is right on. I think most of Washington State is thinking so too. Simply a continuation of MacDonald having bought Boeing with Boeing money. Disgusting
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Shenzhen
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 5:23 pm

Boeing's issue with the cost of the 787 thus far is water under the bridge. Their debt load is close to their cash on hand and they are expected to bank 10 billion per year for the foreseeable future. I wish I had Boeing's problems.  
 
frmrCapCadet
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 7:53 pm

Boeing needs to spend many billions more than Airbus to stay really competitive. 787 continues to lose money, 737s may need more improvement than planned, and the 777 may be a niche product, admittedly a large niche.
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mjoelnir
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 8:22 pm

Quoting Shenzhen (Reply 66):
Boeing's issue with the cost of the 787 thus far is water under the bridge. Their debt load is close to their cash on hand and they are expected to bank 10 billion per year for the foreseeable future. I wish I had Boeing's problems.

I have some problems with this statement.

Here are some numbers out of the THE BOEING COMPANY FORM 10-Q For the Quarter Ended March 31, 2016

all nubers in million USD

Boeing cash and cash equivalents 7,886
Equity 4,106

Now debts:

First the long term stuff
Accrued retiree health care 6,614
Accrued pension plan liability, net 18,196
Other long-term liabilities 2,096
Long-term debt 8,721

Now the short term stuff
Accounts payable 11,558
Accrued liabilities 12,790
Advances and billings in excess of related costs 23,926
Short-term debt and current portion of long-term debt 1,243

Somehow I have the feeling that debt vastly exceeds cash

Yes Boeing has assets to cover that, the difference between assets and liabilities is equity, but about 28,5 billion USD in assets is thin air produced by program for cost accounting.   
 
justloveplanes
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 9:10 pm

Quoting frmrCapCadet (Reply 65):
IMO Boeing is in deep shit. Not because the company has not potentials, but because of a management desperate focused on share price and market capitalization to the exclusion of all other factors.
Not enough that dividends are paid out on profits based on future earnings, but spending crazy amounts of capital on share buy backs. Instead of looking for a solid capital base, capital is burned like there is no tomorrow.
Equity seems to be a four letter word, better to have non. And one has to look at the fact that because of cost for program accounting a big part of the declared assets are nothing but thin air.

IMO Boeing should rather collect capital, like selling own shares, than buying them back.

While I often have wondered about some of your posts this is right on. I think most of Washington State is thinking so too. Simply a continuation of MacDonald having bought Boeing with Boeing money. Disgusting

I am not sure it's as generic as all that. I think the big problems with Boeing overselling the 787 like crazy ahead of the game that made the situation as bad as it was. The point being, they did the 777 right and are continuing to do it right. They are doing well on building the 737 with what they have, but the 787 screwup messed up their chance to re-engineer a new platform (which I recall being discussed) and so now are band-aiding their old platform. The 787 fiasco was hugely damaging to their strategic plans. The are one tough company however and back on their feet and still moving and generating profits (they are in no trouble, fact is the 787 isn't going to keep losing money), but the 737Max is not as good as it could have been. The new CEO seems much better with labor too, so I think the fundamental problems the company has now are clean up from the 787, and catchup with the 737.

FYI, I still don't understand why deferred production costs aren't falling faster, but we'll have to wait and see.
 
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 9:18 pm

Quoting justloveplanes (Reply 69):
FYI, I still don't understand why deferred production costs aren't falling faster, but we'll have to wait and see.

The answer can only be that it continues to cost more to produce than they sell for. I am not sure what is difficult to understand.
 
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scbriml
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 9:34 pm

Quoting justloveplanes (Reply 69):
FYI, I still don't understand why deferred production costs aren't falling faster

Deferred costs are not falling at all, but at least the rate of increase is slowing. It is somewhat shocking to hear Boeing say they won't start falling until late this year.
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7BOEING7
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 10:25 pm

Quoting justloveplanes (Reply 69):
They are doing well on building the 737 with what they have, but the 787 screwup messed up their chance to re-engineer a new platform (which I recall being discussed) and so now are band-aiding their old platform.

The 787 had nothing to do with it. The technology (mainly engine) wouldn't have been available to get the desired improvement -- it was still several years out. They could have waited but AB with the NEO forced their hand. The 787 could have been on time and on budget and we'd still have the MAX we have today.
 
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Wed May 11, 2016 11:01 pm

Quoting mjoelnir (Reply 57):
IMO Boeing is in deep shit. Not because the company has not potentials, but because of a management desperate focused on share price and market capitalization to the exclusion of all other factors.
Not enough that dividends are paid out on profits based on future earnings, but spending crazy amounts of capital on share buy backs. Instead of looking for a solid capital base, capital is burned like there is no tomorrow.
Equity seems to be a four letter word, better to have non. And one has to look at the fact that because of cost for program accounting a big part of the declared assets are nothing but thin air.

Great summary.

Perhaps reaching the point of a fresh start. Worked for some of their US customers.
 
klkla
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 1:53 am

Quoting Planesmart (Reply 73):
Perhaps reaching the point of a fresh start. Worked for some of their US customers.

That might be a little premature at this point.

From the Morningstar article quoted earlier "Boeing ended the first quarter with $7.9 billion in cash and forecasts approximately $10 billion in operating cash flow in 2016, and signals it expects that to climb through the remainder of the decade. It had revenue of $96.1 billion in 2015. "

$10 Billion cash flow for this year is significant. Yes, Boeing messed up on the 787 and that is going to be a pain from an accounting standpoint but most of the actual operating costs associated with that are behind them.
 
mjoelnir
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 11:03 am

Quoting klkla (Reply 74):
Quoting Planesmart (Reply 73):
Perhaps reaching the point of a fresh start. Worked for some of their US customers.

That might be a little premature at this point.

From the Morningstar article quoted earlier "Boeing ended the first quarter with $7.9 billion in cash and forecasts approximately $10 billion in operating cash flow in 2016, and signals it expects that to climb through the remainder of the decade. It had revenue of $96.1 billion in 2015. "

$10 Billion cash flow for this year is significant. Yes, Boeing messed up on the 787 and that is going to be a pain from an accounting standpoint but most of the actual operating costs associated with that are behind them.

But Boeing sits on a loss of 29 billion USD. They either have to account for it as a loss, or the 787 program has to bring it in.
Boeing has already spend this money twice, once while producing 400 787 at a loss and the second time using up profits for dividends and share buy backs, profits that Boeing has still to earn.
 
art
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 1:29 pm

Quoting mjoelnir (Reply 75):
Boeing has already spend this money twice, once while producing 400 787 at a loss and the second time using up profits for dividends and share buy backs, profits that Boeing has still to earn.

To a non-accountant paying dividends based on unrealistic future earnings (no $30 billion 787 loss to be considered) is ridiculous. Isn't it just management et al wanting unrealistic kudos and bonuses based on unrealistic expectations? Boeing recovering $30 billion on the remaining 800/900 to be manufactured in the accounting block ain't gonna happen! The only people pretending it is gonna happen seem to be people where maintaining the fantasy gets them $$$ ASAP.
 
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 2:49 pm

http://www.seattletimes.com/business...sy-times-ahead-despite-challenges/

A reporter, not an opinion piece, by Dominic Gates. Boeing's case for an optimistic future.
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klkla
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 3:53 pm

Quoting mjoelnir (Reply 75):
But Boeing sits on a loss of 29 billion USD. They either have to account for it as a loss, or the 787 program has to bring it in.

It will likely bring it in. There is no doubt there will be more orders as outstanding orders are filled and the 787-10 is introduced.

And, If there's a recession they will likely use that as an excuse to take a huge one-time hit against earnings. That has been done by many companies in the past. Remember that would be an accounting entry and not deplete their cash position. The cash has already been spent. We are talking abut accounting entries.
 
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Ncfc99
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 4:52 pm

Quoting klkla (Reply 78):
Quoting mjoelnir (Reply 75):
But Boeing sits on a loss of 29 billion USD. They either have to account for it as a loss, or the 787 program has to bring it in.

It will likely bring it in. There is no doubt there will be more orders as outstanding orders are filled and the 787-10 is introduced.

It will bring it in, but how long is that going to take? I can't see the next 900 frames outstanding to be delivered will repay the $29b. They haven't even broken even yet. Any further orders are going to suffer from pricing pressure from the 330 & 350. A recent article put it at north of 2000 deliveries before the $29b has been recouped. The 787 production isn't going to contribute anything to the bottom line before 2026.

Quoting klkla (Reply 78):
Remember that would be an accounting entry and not deplete their cash position. The cash has already been spent. We are talking abut accounting entries.

It will have to show as a debt repayment. The cash is spent and the $29b had to come from somewhere.

The problem mjoelnir has, and many others including myself, is that boeing is paying dividends and buying back stock on $29b of profits not yet earned, and paying bonuses on those future profits. The management team that is in place in 5 years time is going to report lower profits than it should because they have already been declared, their bonuses are going to be smaller as a result.
 
Shenzhen
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 6:20 pm

Quoting Ncfc99 (Reply 79):

Quoting klkla (Reply 78):
Quoting mjoelnir (Reply 75):
But Boeing sits on a loss of 29 billion USD. They either have to account for it as a loss, or the 787 program has to bring it in.

It will likely bring it in. There is no doubt there will be more orders as outstanding orders are filled and the 787-10 is introduced.

It will bring it in, but how long is that going to take? I can't see the next 900 frames outstanding to be delivered will repay the $29b. They haven't even broken even yet. Any further orders are going to suffer from pricing pressure from the 330 & 350. A recent article put it at north of 2000 deliveries before the $29b has been recouped. The 787 production isn't going to contribute anything to the bottom line before 2026.

Quoting klkla (Reply 78):
Remember that would be an accounting entry and not deplete their cash position. The cash has already been spent. We are talking abut accounting entries.

It will have to show as a debt repayment. The cash is spent and the $29b had to come from somewhere.

The problem mjoelnir has, and many others including myself, is that boeing is paying dividends and buying back stock on $29b of profits not yet earned, and paying bonuses on those future profits. The management team that is in place in 5 years time is going to report lower profits than it should because they have already been declared, their bonuses are going to be smaller as a result.

You are correct, the money has been spent, the hard times were years and years ago, when the cash flow was nearly non existent, in order to "spend the cash".

Boeing is a public company, and as such, returns most of its profits to the share holders. However, they are sitting on nearly 35 billion dollars of treasury stock (from the stock buy backs) that could be sold on the market.

Relatively speaking, Boeing doesn't have much outside debt, or in other words, they didn't go borrow 30 billion dollars to create the 787 (along with all the inventory and infrastructure). With that being said, the money Boeing are making toady and going out 20 more years, on the 787 is going directly to the cash flow (and yes, they are making money on 787 deliveries (not all) today (most of the additional program cost now are for the -10 and rate increases).

Regarding the program costs, I believe Boeing has stated 23 billion will be accounted for via the current backlog. They are expecting the rest to be spread out over future orders.

Boeing could bank 10s of billions dollars in the next few years, but they won't, because they return money to the share holder via dividends, or buy back shares (which makes sense if you think that purchasing will provide a better return) or actually invest in future products (stealing from those new product profits, LOL).

Cheers

[Edited 2016-05-12 12:05:02]
 
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7BOEING7
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 6:21 pm

Quoting Ncfc99 (Reply 79):
It will bring it in, but how long is that going to take? I can't see the next 900 frames outstanding to be delivered will repay the $29b

If you read the article, this is how Boeing explains it. Most interesting is the last sentence. You don't stand up in public and make comments like this unless you have your facts and data in order -- the SEC wouldn't like that.

"Chief Financial Officer Greg Smith said this higher volume, along with the greater number of larger and higher-profit 787-9 and -10 models in the mix going forward, will generate a copious cash flow.

And he said the pricing on the next 900 Dreamliners to be delivered will be much better than the pricing on the 400 delivered to date.

The prices of the early 787s were drastically lowered by early launch deals and by settlements with airline customers over delays.

Smith said the improved pricing and higher production rate ensure that Boeing will recover the huge accumulation of deferred costs on the 787, which now total $29 billion.

In making this projection, he emphasized that Boeing is not depending on future cost savings, but simply on delivering the next 900 airplanes on time."
 
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jambrain
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 7:54 pm

Quoting Stitch (Reply 63):
They did. The Average List Price for the 787-8 rose $7 million between 2005 and 2006. It went up another $15 million in 2007. That's an 11% rise between 2005 and 2007.

And yet they are still adding to deferred cost after the 400th delivered?

That suggests that initial price was $25m low, wow!

Quoting 7BOEING7 (Reply 81):
The prices of the early 787s were drastically lowered by early launch deals and by settlements with airline customers over delays.

Did the delay penalties alone eliminate the profit margin? If so when did the production dates catch up to avoid paying delay penalty?
Jambrain
 
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Stitch
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 8:16 pm

Quoting jambrain (Reply 82):
And yet they are still adding to deferred cost after the 400th delivered?

Yes, but Boeing is working on serious change incorporation on the teens now, and I imagine that's going to be expensive. Plus the time they have spent sitting around: LN12 took her first flight almost six years after initial construction. I bet Boeing has cumulatively lost in the eight or even nine-figures on that bird by the time she's handed over to Ethiopian.


Quoting jambrain (Reply 82):
Did the delay penalties alone eliminate the profit margin?

The Qantas Group received almost $300 million in compensation, which equates to a bit over $27 million a frame for each of JetStar's 787-8s. Considering they were an early customer, I imagine it not only wiped out the profit margin, but incurred a not-insignificant loss per frame.
 
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7BOEING7
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 8:32 pm

Quoting jambrain (Reply 82):
If so when did the production dates catch up to avoid paying delay penalty?

We'll never know -- there will always be a lot of unanswered questions related to the 787 program. I'm guessing though that sometime before the "rollout" they knew they had issues and started writing contracts accordingly. The actual penalties were probably pocket change compared to the discounts and other issues.
 
mjoelnir
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 8:44 pm

Quoting Shenzhen (Reply 80):
Boeing is a public company, and as such, returns most of its profits to the share holders. However, they are sitting on nearly 35 billion dollars of treasury stock (from the stock buy backs) that could be sold on the market.

that is only a fancy name for their own bought back stock. The amount shows only how much they spent on buying it back. It is not convertible to cash. Selling it again is the same procedure as giving out new stock and try to get investors to invest in it.

The only real number there is equity and that is a paltry amount.

Quoting 7BOEING7 (Reply 81):
"Chief Financial Officer Greg Smith said this higher volume, along with the greater number of larger and higher-profit 787-9 and -10 models in the mix going forward, will generate a copious cash flow.

And he said the pricing on the next 900 Dreamliners to be delivered will be much better than the pricing on the 400 delivered to date.

The prices of the early 787s were drastically lowered by early launch deals and by settlements with airline customers over delays.

Smith said the improved pricing and higher production rate ensure that Boeing will recover the huge accumulation of deferred costs on the 787, which now total $29 billion.

In making this projection, he emphasized that Boeing is not depending on future cost savings, but simply on delivering the next 900 airplanes on time."

People are aloud to dream.
 
Shenzhen
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 9:07 pm

Quoting mjoelnir (Reply 85):
that is only a fancy name for their own bought back stock. The amount shows only how much they spent on buying it back. It is not convertible to cash. Selling it again is the same procedure as giving out new stock and try to get investors to invest in it.

The only real number there is equity and that is a paltry amount.

I call it a brokerage account  

By the way, please tell how you spend the same dollar twice without incurring debt? I really need to learn this trick.

quote
But Boeing sits on a loss of 29 billion USD. They either have to account for it as a loss, or the 787 program has to bring it in.
Boeing has already spend this money twice, once while producing 400 787 at a loss and the second time using up profits for dividends and share buy backs, profits that Boeing has still to earn.
unquote

Maybe they just have a very strong ability to generate cash from all those previous decades in which they stole from the current profits (but not cash flow)  

Cheers
 
mjoelnir
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 9:41 pm

Quoting Shenzhen (Reply 86):
By the way, please tell how you spend the same dollar twice without incurring debt? I really need to learn this trick.

That is what program for cost accounting is all about.

You make a plan of selling 400 frames for 100 and plan to produce them for average of 85 that would give a profit of 15 per frame.
Now you produce the first 10 frames. You get, because you give early user discount, 90 per frame and it cost you 120 to produce the frame. If you would do unit cost accounting you declare 10 x 30 = 300 as a loss. But there comes program for cost accounting. You forget reality and book 10 x 100 on the sale, 10 x 85 on production cost, 10 x 15 on profit and you deffer 450 and spend your 150 hard earned profit. That is what I call using the dollar twice.
The deferred production cost you book as an asset, like it would be something real you could sell. Boeing fan boys do not seem to understand that the 450 you took out of the piggy bank, money you got loaned somewhere, you have to put back someday.
It is mostly a little more complicated as in having a second program making 300 real profit. Than you would in unit cost accounting have a zero profit and nothing to spend, but in program for cost accounting you have a profit of 450 and heaps to spend.
The problem is just some day reality will bite you.

[Edited 2016-05-12 14:51:40]

[Edited 2016-05-12 14:52:45]

[Edited 2016-05-12 15:10:58]
 
Planesmart
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Thu May 12, 2016 10:18 pm

Quoting 7BOEING7 (Reply 81):
And he said the pricing on the next 900 Dreamliners to be delivered will be much better than the pricing on the 400 delivered to date.

Will be interesting to see how many of the current senior management team are around when those 900 are delivered.

And if there is a new team, how their bonuses are calculated.
 
Shenzhen
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Fri May 13, 2016 12:15 am

Quoting mjoelnir (Reply 87):
You make a plan of selling 400 frames for 100 and plan to produce them for average of 85 that would give a profit of 15 per frame.
Now you produce the first 10 frames. You get, because you give early user discount, 90 per frame and it cost you 120 to produce the frame. If you would do unit cost accounting you declare 10 x 30 = 300 as a loss. But there comes program for cost accounting. You forget reality and book 10 x 100 on the sale, 10 x 85 on production cost, 10 x 15 on profit and you deffer 450 and spend your 150 hard earned profit. That is what I call using the dollar twice.
The deferred production cost you book as an asset, like it would be something real you could sell. Boeing fan boys do not seem to understand that the 450 you took out of the piggy bank, money you got loaned somewhere, you have to put back someday.

In reality, one still can't spend the same dollar twice. Money is real.

I think you need to think of it as an investment into the program instead of some loan that needs to be paid back.

Going forward, the 787 will generate billions upon billions of cash for the Boeing Company, even if it never makes enough to payoff the total invested into the program. These billions can be used for anything the company so desires, even launching a 757 replacement.

Here is why, all the inventory that it takes to build a 787 now has the program costs (30 plus billion) added into them, which increases the cost for every plane that will ever be built. However, the real cost of this inventory is much lower, therefore the difference of the airplane's price sold vs it's build cost will be significantly higher than what will be reflected in the Boeing Profit / Loss statement each quarter (this is why Boeing cash flow is always much higher than it's profit).

The dark days of the 787 pulling the company down financially are long gone.

Cheers

[Edited 2016-05-12 17:41:28]
 
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Finn350
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Fri May 13, 2016 4:28 am

Quoting mjoelnir (Reply 87):
You make a plan of selling 400 frames for 100 and plan to produce them for average of 85 that would give a profit of 15 per frame.
Now you produce the first 10 frames. You get, because you give early user discount, 90 per frame and it cost you 120 to produce the frame. If you would do unit cost accounting you declare 10 x 30 = 300 as a loss. But there comes program for cost accounting. You forget reality and book 10 x 100 on the sale, 10 x 85 on production cost, 10 x 15 on profit and you deffer 450 and spend your 150 hard earned profit

They book 10 x 90 (not 100) on sale (real revenue), 10 x 75 (not 85) on production cost, 10 x 15 (the expected average profit of the program) on profit and defer 450 (10 x 120 - 10 x 75) and spend your 150 hard earned profit. This way the increasing sales price helps to recover the deferred production cost.
 
frmrCapCadet
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Fri May 13, 2016 3:15 pm

Again let it be noted that Boeing as well as their controversial 'program accounting' also provides sufficient cash accounting. Stock owners and analysts can recast Boeing figures with adequate accuracy into other accounting systems, and in fact have done so.

Boeing and Boeing unions committed the greatest error in not fully funding pensions and other future benefits. Contractual obligations were made, and the onus of paying for them passed on to future management.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
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JerseyFlyer
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Mon May 16, 2016 8:33 am

This suggests there is currently a surplus of available 787s, due in part to UA swapping early slots for 777s.

As a result, Boeing is effectively competing with leasing companies to place near-term frames. That won't do a lot for profitability, at least in the short term.

https://leehamnews.com/2016/05/16/pontifications-improbably-787-surplus-develops/
 
scotron11
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Mon May 16, 2016 10:05 am

Quoting JerseyFlyer (Reply 92):
This suggests there is currently a surplus of available 787s, due in part to UA swapping early slots for 777s.

Yup..and so far this year Boeing have only sold 12 x 787s......a long way to go to matching their yearly production of 12x per month!
 
StTim
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Mon May 16, 2016 10:42 am

I found it an interesting article. It would appear that Boeing are setting themselves up against two parts of the extended supply chain. One short trem and one longer term.

Currently they have a short term issue with selling the slots freed up by UA and are thus competeing against the lessors. They shouldn't want to be too aggressive against the lessors as they need them longer term. This is a short term pain point but one they should be able to manage.


The other worries me more for them. They are currently (according to reports) squeezing suppliers on price as part of their goal of reaching 15% profit margins. They are also looking to take the high value after market items as well as part of this goal. Thus their suppliers find themselves squeezed both on current price and future after market sales. I wonder what profit margin Boeing think is allowed for their suppliers.

I think this may cause a lot of anger in the supply chain and a huge loss of goodwill towards Boeing. then if there is a choice who do the supply Boeing or ANO they will not choose Boeing.
 
 
Planesmart
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RE: Analyst: 787 Profit Goal Is "unachievable" Part 2

Mon May 16, 2016 10:38 pm

Boeing has three models looking to fill short-term gaps - 737 and 777 due to model transitions, and 787 due to easing of demand and some cancellations and deferrals, making it extremely difficult to even maintain margins, let alone grow them.

There will even be some degree of inter-Boeing competition, let alone with Airbus and others.

Boeing could use Boeing Capital more aggressively, but that will erode support from commercial leasing companies.

If you squeeze suppliers by reducing unit prices and altering other payment terms (like credit period), you are not going to create friends. If there are supply pressures, like with seats, who will get preferential delivery? The company that has recently extended payment terms and reduced unit prices, or the others?

Of course an issue with parts, is Boeing wants to match Airbus and the engine manufacturers, offering fixed price parts deals, a package bundled and negotiated with new aircraft pricing.

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