Skip to main content

CHICAGO (

TheStreet

) --

Boeing

(BA) - Get Boeing Company Report

says it will decide "over the next couple of weeks" whether to add a second 787 production line in Charleston, S.C., despite continuing problems in its far-flung program to develop the aircraft.

In the third quarter, Boeing continued to disappoint investors, reporting

a loss of $1.6 billion

. That loss broke down to $3.59 a share, including $2.46 a share related to 787 cost reclassification for the first three aircraft, and 99 cents a share for 747 charges related to delays brought on largely by the diversion of engineers to the 787.

> See The 787 Boeing Dreamliner

TheStreet Recommends

On an earnings conference call, CEO Jim McNerney described the 787 program model as "a bridge too far, leading edge kind of development, which is what we are trying to recover from right now." He added: "When you look back you see that we lost of some of the discipline, particularly in the context of outsourcing so much of the work."

Nevertheless, McNerney said continuing conflict between Boeing and the International Association of Machinists, which represents about 27,000 Everett, Wash., workers, requires consideration of a Charleston line. "There would be execution challenges associated with that choice, but keep in mind we have a pretty good-sized operation in Charleston today," McNerney said. The challenges would be "more than overcome by strikes happening every three or four years in Puget Sound," he said. "The company and the IAM have had trouble figuring it out between themselves the last few negotiations, and I've got to find a way to figure it out."

For now, the union and the company are talking regularly and "the tone is constructive," he said. Boeing has proposed a no-strike provision that has not been warmly received by the IAM.

Aviation consultant Scott Hamilton is skeptical that Boeing can afford to take the risk of creating a new production line at such a challenging time. "Charleston at this time and under these circumstances isn't just a bridge too far," he said. "It's in the next country too far."

Boeing's glum predicament extends to both its commercial and defense businesses. On the commercial side, development of two new airplanes, the 787 and 747-800 freighter, is behind schedule and accumulating costs; demand for the 737 and the 777 is impacted by the diminished economy, and no new products are available to pump up earnings. On the defense side, government spending is slowing due to budget pressure.

"The challenge is getting through the next couple of years," said McNerney, adding that Boeing will reduce research and development spending and work to improve margins. On the positive side, Boeing's $320 billion backlog equates to nearly five times current annual revenues, no production cuts are planned for the 737, and the most recently announced 787 schedule remains in place, with first flight this year and first delivery late in 2010.

While those charges were expected, Boeing also disclosed a charge of 14 cents a share for August and September spending on the first three 787s and announced 2009 earnings guidance of $1.35 to $1.55, at the low end of analysts' expectations for $1.53 a share.

Boeing shares were down 58 cents to $51.31 in early afternoon trading.

-- Written by Ted Reed in Charlotte, N.C.

.