Updated from 8:36 a.m. EDTBoeing ( BA) said its third-quarter earnings fell by 38% as aircraft deliveries slowed due to a strike by the International Association of Machinists, but CEO Jim McNerney raised hopes that a new round of talks could lead to a resolution. With the dispute focused on the issue of outsourcing jobs in the Puget Sound area, McNerney said Wednesday on an earnings conference call that "the management rights issue is one that leaves us with the ability to manage our business. Having said that, I think there's a way to work with the union to meet some of their goals." "There have been some informal discussions that have, I think, indicated a constructive headset on both sides," he said. "We both readily agreed to get back together." Discussions are scheduled in Washington on Thursday, the strike's 48th day, under the auspices of a federal mediator. The strike began Sept. 6. Talks resumed Oct. 12 but broke down after one day over the issue of outsourcing about 2,000 union jobs that involve delivering parts to assembly lines. Both sides have indicated they were frustrated by the quick breakdown, having thought a solution might be close. Boeing also suspended its financial guidance, saying it would provide an update after the strike concludes. Meanwhile, the company said it earned $695 million, or 96 cents a share, in the third quarter. Analysts surveyed by Thomson Financial had estimated 98 cents. Revenue slumped by 7% to $15.3 billion, but that still beat expectations by $700 million. A year earlier, Boeing earned $1.11 billion.
Earnings were reduced by an estimated 60 cents a share due to fewer airplane deliveries and by 8 cents because of tax adjustments, the company said. The company delivered about 35 fewer commercial airplanes than it had planned. Boeing's backlog increased by 7% during the quarter. The company said that although it has not financed any new airplane deliveries since 2006, it may need to do so beginning in 2009. Boeing has made backstop financing commitments for 3% of its commercial backlog, primarily 787s, that involve deliveries expected through the end of the next decade. At Boeing Integrated Defense Systems, third-quarter revenue rose 6% to $8.5 billion. Operating earnings were up 4% to $854 million. The strike reduced IDS operating margins by an estimated 0.4 points.