Then on Wednesday the company said it will chop 500 jobs over four years in its defense division and close two plants, shifting about 2,500 employees to new work sites.
But the week wasn’t over yet. Late Thursday, the U.S. House of Representatives passed a bill blocking the sale of Boeing and Airbus commercial jets to Iran. Both Boeing and Airbus had plans in place to sell or lease about 200 planes to Iran, but the passage of the House bill forbids the Treasury Department from issuing licenses for the sale, and that means that U.S. banks will not be able to help finance any sales.
Although Airbus is based in France, it is affected by the ban because at least 10% of its airplanes’ components are made in the United States.
The House bill is unlikely to become law in the waning days of the Obama administration, but when the new Trump administration takes over in January, with Republican control of both the Senate and the House, such a restriction might well be pushed through. Trump is also on record as opposed both to Boeing’s plan to build an assembly plant in China and to the nuclear deal struck with Iran that lifted sanctions against the Islamic Republic and enabled the country to ramp up its oil exports and do business with companies like Boeing and Airbus.
Boeing does nothing to help its cause by announcing that it plans to fire 500 workers. The President-elect’s campaign promise to make the country great again depends on his ability to create more U.S. jobs, not jobs in China and Mexico for U.S. companies and their shareholders to profit from while American workers are left behind.
As for the event that started Boeing’s awful week, the United Continental deferral of delivery on new 737-700s and switching four orders to the larger 737-800s, this might have been good, rather than, bad news for Boeing. As Scott Hamilton at Leeham News points out, the switch to the larger plane and eventually to the 737 MAX family, Boeing stands to earn more profits than from the selling the smallest commercial jet it makes. Hamilton also notes that swapping one model for another is “routinely included [in] contract provisions.”
In the short run, Boeing has plenty of orders for the 737, and United’s deferral simply means pulling some orders forward. That should present no problem for the company.
And company that makes the 737 fuselage, Spirit AeroSystems Holdings Inc., has actually seen its share price rise after dipping briefly following the United Continental announcement. That doesn’t sound like Boeing is making plans to trim production of the plane.
In Friday’s pre-market session, Boeing shares traded up about 0.1% at $145.45, after closing Thursday at $145.33. The stock’s 52-week range is $102.10 to $150.59, and the consensus 12-month price target is $151.00.
(Paul Ausick - 24/7 Wall St.)