Two weeks ago, Chief Executive Jim McNerney said Boeing was sticking with the ambitious plan - hatched long before the current battery problems came to light - to increase 787 production to seven a month by mid-year and 10 a month by the end of 2013.
Boeing spokesman Charles Bickers said that is still the plan, and it is too early to know what the financial impact of the 787 grounding will be.
The steep ramp-up is crucial to the profitability of the 787, as the lion’s share of outlays happen early in a plane program. The quicker Boeing can refine the process and ramp up production, the quicker it will reach the target of 1,100 planes, the point where it calculates it will break even on the program. At planned production rates that is already a decade away.
“A slowdown would be crushing,” said Leake at BB&T. “As long as the program accounting assumptions don’t change, Boeing can keep booking the same margin in the current production block. But once production rates change or slow, their assumptions on both revenue and cost will have to change.”
Revenue will likely go down as Boeing will have to offer aggrieved customers more concessions on future purchases to keep them happy, while it loses hundreds of millions of dollars in “progress” payments, which airlines pay as planes near completion. At the same time, costs will stay higher for longer than Boeing has been counting on.
Boeing’s credit rating is not immediately under threat, but the trend is concerning analysts.
“If the grounding persists for many more months, planned increases in the monthly production rate look increasingly suspect - and expensive, possibly further eroding Boeing’s otherwise strong credit profile,” said Solomon at Moody’s.
(Additional reporting by Alwyn Scott in Seattle; Editing by Edward Tobin and Richard Chang)