This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Boeing Bet Rides on 787

A Source of Concern

But orders are one thing, and producing the darn thing is quite another. And this is where we get deeper into the intersection of ambition, complexity and risk. For if the plane misses its 2008 delivery deadline and fails to perform as Boeing's salesmen-engineers promise, then dreamy investors can kiss many of those orders goodbye before the first plane ever takes off.

In its marketing material, the Dreamliner has been sold as a plane that achieves its fuel efficiency and streamlined manufacturing costs through an unprecedented reliance on large quantities of titanium, aluminum and carbon-fiber composites, and on a global supply chain held together by a new software system. Boeing has said that its suppliers and software are performing up to par and that it has not encountered any difficulty in securing enough specialty metals.

Yet persistent rumors have surfaced over the past six months, denied by the company, that the 787 schedule has been plagued with technical, production and supply hitches.

Fear of the loss of a ready source of titanium was in large part behind the company's stunning pledge to spend $27 billion over the next three decades on engineering and raw materials in Russia, an economically and politically unstable country that happens to house most of the world's supply of the key metal.

Two weeks ago, Business Week reported that the passenger-seating section of the 787 fuselage has failed in testing. The company blamed the problem on faulty quality controls, but denied that construction problems at Asian or European airframe contractors would force it to bring more of the work back to the U.S.

Cancellations Coming?

Citigroup aviation analyst George Shapiro notes that, historically, Boeing shares have not performed well during development cycles, and adds that their recent success "reflect(s) a lack of concern about problems developing" with the 787 and its outsourced research and development efforts.

Shapiro also warns that the 787 production cycle may be shorter than normal, as airline profitability has not recovered enough to support the order surge. He expects a wave of order cancellations, even if delivery schedules are met.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
ZOLT $0.00 0.00%
TIE $16.50 0.00%
BA $144.02 -0.45%
BEAV $60.26 0.13%
INTC $33.43 0.03%

Markets

DOW 18,070.40 +46.34 0.26%
S&P 500 2,114.49 +6.20 0.29%
NASDAQ 5,016.9290 +11.5380 0.23%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs