Boeing reported its earnings for 2011 and its estimates for 2012, including delivery estimates for the 787–which were surprisingly low.
Boeing forecast 70-85 787/747 deliveries this year, with half (35-44) being 787s. This is will below Wall Street consensus, though David Strauss at UBS predicted 40. We find this a stunningly low number that doesn’t reflect well on either production ramp up or fixing the rework necessary for the more than three dozen 787s at Everett.
Boeing’s own Z24 production plan for this year had a production rate of 45 787s.
We are, as the Brits say, gobsmacked by this information. (Update, 0800 PST: In Q&A, McNerney says 787 deliveries affected by large number of change incorporation required.)
From the conference call:
Jim McNerney (JM)
Greg Smith, CFO (GS)
JM: Now at 2.5 rate on 787, going to 3.5 in 2Q, sticks with 10/mo late 2013. First non-change line number in mid-60s.
GS: Will consider rates about 10/mo on 787.
JM: In 2011 Boeing improved on every financial metric.
JM: We’re confident in the amount of 787/747 projected deliveries. A little more than half of 787s will come out of change incorporation, rest straight off the line. A little more than half in work now.
GS: A lot of cash generated in 2012 is directly related to commercial delivery profile, including 787 and 747. Inventory will continue to grow but will taper off when hitting peak production on 787.
JM: A lot of our challenge has been change incorporation due to flight test discoveries. Rate ramp has stayed [consistent] last year, year-and-a-half. Engineering changes bigger affect on delivery rate than ramp rate. (Editor: see our previous post [linked above] on Z24 ramp up rate reduction, however.)
JM: Open items on 747-8F: production is going well. We have a pretty decent pipeline of airplanes we’re working now, most of which are decision-able for orders in 2012. The economic cycle has not been friendly to VLA. These freighters are very productive machines. We have a decent Intercontinental pipeline. On 767F, FDX was important for a very important customer and provides a nice bridge to tanker. Negotiating with other potential 767F customers. Linchpin was FDX. We’re in active discussions on the Atlas 748s. The flutter issue on 748 is not “out of bounds” on issues for new airplane and we will work through it.
JM: Orders will exceed book-to-bill with MAX commitment-to-order conversions. We also see robust orders in other product lines.