How Boeing Blew the Dreamliner

[mirrodie]

http://articles.moneycentral.msn.com/In ... Truth.aspx (http://articles.moneycentral.msn.com/Investing/SuperModels/BoeingBendsThePlaneTruth.aspx)


I was a bit surprised to read email and come across this article on MSN this morning. While the article is geared toward investors, I'm wondering how the aviation community perceives the article.

[T-Bird76]

I didn't read one fact in that article, just opinion based on absolutely nothing...Anyone that comes out and says the Dreamliner is a flop this soon is truly a fool. I doubt Boeing would blow smoke and mirrors up it's customers assess and risk losing billions. Anyone with a shred of common sense knew it would be delayed.

[Matt Molnar]

He's not saying Boeing "blew it," only that Boeing's denials of delays were foolish and unfair to investors. The delays will cost the company money, and anything that hurts the bottom line hurts stock prices. I agree with him, but I don't think it's a huge problem. Even in the event of a disaster like a delivery delay of a year, customers don't have many alternatives, and Boeing will be fine in the long term.

[T-Bird76]

He's not saying Boeing "blew it," only that Boeing's denials of delays were foolish and unfair to investors. The delays will cost the company money, and anything that hurts the bottom line hurts stock prices. I agree with him, but I don't think it's a huge problem. Even in the event of a disaster like a delivery delay of a year, customers don't have many alternatives, and Boeing will be fine in the long term.

Matt why would any company risk their stock price and say their product "might" be delayed, that's foolish. I can't think of to many companies that would shoot themselves in the foot before hand and then deliver as promised. Boeing didn't lie, I'm sure they were waiting for the complete picture before coming out with the delay. I'd rather have all my pieces in place and know exactly how long and why a product is being delayed vs. speculating that they're might be a delay. As long as other problems don't appear I don't think the investors were mislead at all.

[pgengler]

Matt why would any company risk their stock price and say their product "might" be delayed, that's foolish. I can't think of to many companies that would shoot themselves in the foot before hand and then deliver as promised. Boeing didn't lie, I'm sure they were waiting for the complete picture before coming out with the delay. I'd rather have all my pieces in place and know exactly how long and why a product is being delayed vs. speculating that they're might be a delay. As long as other problems don't appear I don't think the investors were mislead at all.

Well, in the 787 delays thread (http://nycaviation.com/forum/viewtopic.php?f=9&t=8623), the linked article from SeattlePI (http://seattlepi.nwsource.com/business/334520_planeorders06.html) (dated October 5) shows that while analysts figured that there'd be a delay (and Boeing shares dropped just from that) but the company officially stated they were still on track, despite "senior company executives ... acknowledg[ing] that schedule is at 'risk'." Just five days later, the company announced the 6-month delay.

I find it a little strange that the company's outlook could change to significantly in just five days (three business days). Sure, they could have done a reappraisal of the situation in that time, but I think it's a safe bet that they knew there'd be a delay even when they said they were still on track. Maybe nothing had been made official regarding a delay at that point, and they just reiterated their previous statements about the timetable, so that it isn't officially lying, but you can be sure that everyone involved knew, to themselves, there'd be a delay.

Part of the problem is that public companies have to play the Wall Street game to keep investors coming, and that the Street doesn't reward honesty from companies, it punishes it. If you can cover up problems, all else being equal, your share price will remain level or rise compared to publicly announcing problems. So companies endeavor to put as much of a positive spin on things as they can, for as long as they can, to keep the share price up. When the truth finally comes out, share prices drop anyway, but the company's pocketed the interest from the weeks/months it was up and they knew about the problem but investors didn't. Considering that the price is going to drop by about the same amount in any case, there's little-to-no reason for companies to acknowledge problems before they absolutely have to.

[T-Bird76]

Matt why would any company risk their stock price and say their product "might" be delayed, that's foolish. I can't think of to many companies that would shoot themselves in the foot before hand and then deliver as promised. Boeing didn't lie, I'm sure they were waiting for the complete picture before coming out with the delay. I'd rather have all my pieces in place and know exactly how long and why a product is being delayed vs. speculating that they're might be a delay. As long as other problems don't appear I don't think the investors were mislead at all.

Well, in the 787 delays thread (http://nycaviation.com/forum/viewtopic.php?f=9&t=8623), the linked article from SeattlePI (http://seattlepi.nwsource.com/business/334520_planeorders06.html) (dated October 5) shows that while analysts figured that there'd be a delay (and Boeing shares dropped just from that) but the company officially stated they were still on track, despite "senior company executives ... acknowledg[ing] that schedule is at 'risk'." Just five days later, the company announced the 6-month delay.

I find it a little strange that the company's outlook could change to significantly in just five days (three business days). Sure, they could have done a reappraisal of the situation in that time, but I think it's a safe bet that they knew there'd be a delay even when they said they were still on track. Maybe nothing had been made official regarding a delay at that point, and they just reiterated their previous statements about the timetable, so that it isn't officially lying, but you can be sure that everyone involved knew, to themselves, there'd be a delay.

Part of the problem is that public companies have to play the Wall Street game to keep investors coming, and that the Street doesn't reward honesty from companies, it punishes it. If you can cover up problems, all else being equal, your share price will remain level or rise compared to publicly announcing problems. So companies endeavor to put as much of a positive spin on things as they can, for as long as they can, to keep the share price up. When the truth finally comes out, share prices drop anyway, but the company's pocketed the interest from the weeks/months it was up and they knew about the problem but investors didn't. Considering that the price is going to drop by about the same amount in any case, there's little-to-no reason for companies to acknowledge problems before they absolutely have to.

I think you're assuming they knew...why isn't perfectly plausible that they didn't they're would be a delay a few days before hand? Also based on a number of SOX requirements it’s very hard for companies to as you say "cover up problems." It’s a delay, big deal. A drop in Boeings stock price won't be a huge deal for them as their stock will certainly rebound. Any investor who thought the 787 would be ready ontime is probably an investor I wouldn't want investing my money.

[pgengler]

I think you're assuming they knew...why isn't perfectly plausible that they didn't they're would be a delay a few days before hand? Also based on a number of SOX requirements it’s very hard for companies to as you say "cover up problems." It’s a delay, big deal. A drop in Boeings stock price won't be a huge deal for them as their stock will certainly rebound. Any investor who thought the 787 would be ready ontime is probably an investor I wouldn't want investing my money.

Just to make clear, I wasn't try to say that Boeing was hiding large problems, just that such things to happen from time to time.

Regarding the delay, I said what I think about that, but to put it again (perhaps more clearly), maybe the company hadn't officially agreed that there would be a delay, but the people involved had to know that there was going to be one. With a project as large as the 787, these things don't just suddenly spring up unless there's some other thing that happens. You don't just wake up one morning and realize that your project is now going to be six months behind schedule; it's something you gradually come to realize. You may not want to accept it, but I don't believe that a single person in the management team for this didn't have a really good idea that a delay was pretty much inevitable. Especially since a lot of investors had a good idea about that while the official corporate line was that things were fine. You can't honestly be telling me that even while people who don't (or at least shouldn't) have the inside scoop on the project figured out there'd be a delay before the people actually working on the project.

[mirrodie]

Just to be equally clear,

I didnt make up the topic title "boeing blew it". That was the title on the front page of msn.com this morning

just a quick cut and paste below:


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