|Bid||324.20 x 1000|
|Ask||324.44 x 1300|
|Day's Range||323.00 - 332.50|
|52 Week Range||319.55 - 446.01|
|Beta (5Y Monthly)||1.19|
|PE Ratio (TTM)||48.79|
|Earnings Date||Jan. 28, 2020|
|Forward Dividend & Yield||8.22 (2.54%)|
|Ex-Dividend Date||Feb. 11, 2020|
|1y Target Est||352.95|
(Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.Elon Musk’s rocket company passed a crucial safety test Sunday, clearing its last major hurdle to an historic first crewed flight for NASA, possibly in the first half this year.The hardware necessary for the first launch with astronauts will probably be in place by the end of February, Musk said at a press conference with NASA and SpaceX representatives following the test. The “collective wisdom” among his colleagues was that an inaugural flight was possible in the second quarter of 2020, he said.Sunday’s test shows SpaceX can safely abort a mission if something goes wrong after takeoff. It was delayed from the previous day due to poor conditions in the recovery area. Musk described the safety test as “picture perfect,” and congratulated the respective teams on their dedication.“I’m super fired up, this is great,” Musk added. “It appears probable that the first crewed launch could occur in the second quarter.”NASA Administrator Jim Bridenstine noted a number of parachute tests are still required prior to a crewed launch. Kathy Lueders, manager of the NASA commercial crew program, noted the “flawless execution” of the abort mission.The Falcon 9 rocket with Crew Dragon spacecraft launched from Kennedy Space Center in Florida at 10:30 a.m. About 84 seconds after liftoff, SpaceX demonstrated Dragon’s ability to eject from the rocket during an emergency.The in-flight abort test included a series of complex maneuvers before Dragon’s parachutes deployed, according to SpaceX’s press kit, and the craft splashed down in the Atlantic Ocean about 10 minutes after liftoff. The Falcon 9 rocket broke up offshore, as planned.Americans have not flown into space aboard a U.S. craft since the shuttle program ended in 2011. Sending astronauts to the space station also is an important step for Musk’s Hawthorne, California-based company. The billionaire aims eventually to transport people to the Moon and Mars.NASA awarded SpaceX and Boeing Co. a combined $6.8 billion in contracts in 2014 to revive America’s ability to fly to the space station without buying seats on Russian Soyuz capsules. Since then, the agency and both companies have suffered delays that have put the program more than two years behind schedule.In December, Boeing’s Starliner failed to dock with the station because of a problem with the mission’s timing software. The Chicago-based company and NASA are investigating, and the agency will decide if Boeing needs to perform a second flight without crew.(Updates with comments from press conference.)To contact the reporters on this story: Dana Hull in San Francisco at email@example.com;Emily Barrett in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, Kevin Miller, James LuddenFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Elon Musk’s rocket company has one last, major hurdle to clear before it attempts an historic first flight of astronauts for NASA: proving it can safely abort a mission if something goes wrong after takeoff.A test of the abort procedure set for Saturday was delayed by 24 hours due to sustained winds and rough seas in the recovery area, SpaceX said on Twitter. It’s now targeting a six-hour window starting at 8 a.m. Eastern time Sunday.A Falcon 9 rocket with Crew Dragon spacecraft is now slated to launch tomorrow from Kennedy Space Center in Florida. About 84 seconds after liftoff, SpaceX plans to demonstrate Dragon’s ability to eject from the rocket during an emergency.The in-flight abort test includes a series of complex maneuvers before Dragon’s parachutes should deploy and the craft splashes down in the Atlantic Ocean about 10 minutes after liftoff. The Falcon 9 rocket is expected to break up offshore, according to SpaceX’s press kit.“You design this with the hopes that you never have to use it, but this is showing that it works in the real world,” said former astronaut Garrett Reisman, former director of space operations at Space Exploration Technologies Corp. and a professor of astronautics at the University of Southern California.The procedure is the final big test before NASA can certify that SpaceX is ready to ferry astronauts to and from the International Space Station. U.S. Air Force Colonel Bob Behnken and former Marine Corps test pilot Doug Hurley will be Dragon’s first passengers.“There’s a lot riding on this,” said Reisman, who remains an adviser to SpaceX.Americans have not flown into space aboard a U.S. craft since the shuttle program ended in 2011. Sending astronauts to the space station also is an important step for Musk’s Hawthorne, California-based company. The billionaire chief executive officer aims eventually to transport people to the Moon and Mars.Read more: Boeing and SpaceX Are Racing to Bring Astronauts, Then Tourists, to Space“This is the culmination of years of work,” Benji Reed, SpaceX’s director of crew mission management, said during a pre-launch press conference with NASA on Friday.NASA awarded SpaceX and Boeing Co. a combined $6.8 billion in contracts in September 2014 to revive America’s ability to fly to the space station without buying seats on Russian Soyuz capsules. Since then, the agency and both companies have suffered delays that have put the program more than two years behind schedule.In December, Boeing’s Starliner failed to dock with the station because of a problem with the mission’s timing software. The Chicago-based company and NASA are investigating, and the agency will decide if Boeing needs to perform a second flight without crew.SpaceX’s Dragon capsule successfully docked with the station in March as part of its Demo-1 test.(Updates with test moved to Sunday.)To contact the reporter on this story: Dana Hull in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Craig Trudell at email@example.com, Andrew DavisFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Boeing Co. has identified a new software flaw in the grounded 737 Max that will require additional work, possibly further delaying the plane’s return to service.The company alerted the U.S. Federal Aviation Administration and is notifying customers and its suppliers, it said in an emailed statement. Boeing’s best-selling jet was grounded on March 13 after two fatal crashes involving a flight-control system.The issue involves how software on the plane checks itself to ensure it’s receiving valid data, said a person familiar with the issue who wasn’t authorized to speak publicly about it. It occurs when the system is initially starting up, the person said.“We are making necessary updates and working with the FAA on submission of this change, and keeping our customers and suppliers informed,” Boeing said in its statement. “Our highest priority is ensuring the 737 MAX is safe and meets all regulatory requirements before it returns to service.”The FAA didn’t comment directly on the latest issue to arise on the problem-plagued plane. “We continue to work with other international aviation safety regulators to review the proposed changes to the aircraft,” the agency said in an emailed statement. “Our first priority is safety, and we have set no time-frame for when the work will be completed.”The 737 Max is costing the plane-maker billions of dollars in losses. The software problem was discovered during the final validation review process of the updates being installed on the plane, the person said.It’s unclear how time-consuming the repair will be. Software systems on aircraft require a far higher degree of reliability and checks before approval compared to consumer products. But the issue could be relatively narrow and therefore not nearly as complex as other work on the software.News of the flaw sent Boeing shares down as far as $323, less than $3 from their closing low after the second Max crash. The stock closed down 2.3% in New York at $324.15, the day’s biggest loser on the Dow Jones Industrial Average. Boeing’s long-term issuer default rating was downgraded by Fitch to A- from A.The discovery has already pushed Boeing’s work back by at least a week, said another person familiar with the matter who also wasn’t authorized to speak about it. It’s unclear how much longer it will take to complete fixes, the person said.The issue is in the plane’s flight-control computer software. It was confined to how it performs validation checks during startup and doesn’t involve its function during flight, the people said.The problem came to light when the latest version of the software was loaded onto an actual aircraft, according to one of the people. While it has been tested on planes in flight, most of the software reviews have occurred in a special simulator used by engineers on the ground.Airlines have already built months of delay into their schedules to resume flying the plane, so it’s possible the software work won’t require additional changes. Southwest Airlines Co., American Airlines Group Inc. and United Airlines Holdings Inc. have said they won’t fly the plane again until June. “Boeing has made us aware of the issue but it’s too early to provide any indication regarding potential impact to timing” of the plane’s return to service, said Brandy King, a Southwest spokeswoman.Carriers have said they’ll need to adopt new pilot training and to work on planes to prepare them for service once the grounding is lifted by the FAA.Boeing announced on Jan. 7 that it will recommend pilots undergo additional simulator training on the Max, a reversal of their long-held view that crews qualified on other 737 models only needed computer-based instruction. That action makes it more likely the FAA and other nations will require the additional training.The crash of a Lion Air 737 Max on Oct. 29, 2018, and an Ethiopian Airlines plane on March 10 both occurred after a system known as Maneuvering Characteristics Augmentation System repeatedly pushed the planes into dives. Pilots in both cases were able to temporarily maintain control, but eventually the jets entered steep dives and crashed.Boeing has been working for more than a year on fixing software to ensure that MCAS is safe. The process has been bumpy at times as new glitches arose and tension flared with regulators.During the process of assessing the plane last year, Boeing discovered another issue and had to redesign its flight-control computers. The reworking of that software has been one of the reasons that the repairs have taken so long.A Boeing audit of the aircraft at the end of last year also discovered that wiring on the plane was potentially vulnerable to short-circuits that could trigger flight-control problems. That will require moving some wiring in the plane.(Updates with details about issue, background starting in third paragraph)\--With assistance from Justin Bachman.To contact the reporters on this story: Alan Levin in Washington at firstname.lastname@example.org;Mary Schlangenstein in Dallas at email@example.comTo contact the editors responsible for this story: Jon Morgan at firstname.lastname@example.org, Ros KrasnyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Boeing Co said on Friday it is addressing a new software issue discovered in Iowa last weekend during a technical review of the proposed update to the grounded Boeing 737 MAX, a development that could further delay the plane's return to service. "We are making necessary updates," Boeing said in a statement. The monitor check is prompted by a software command at airplane or system power up, and will set the appropriate indication if maintenance is required, company officials added.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. China’s $200 billion, two-year spending spree negotiated with the Trump administration appears increasingly difficult to deliver, with more than $50 billion of U.S. exports annually left out and many American businesses still uncertain about just what the expectations are.While U.S. officials have stressed the reforms aimed at curbing intellectual-property theft and currency manipulation that China has agreed to in the “phase one” trade deal signed Wednesday, the Chinese pledge to buy more American exports has become an emblem of the deal to critics and supporters alike.The administration has said those new exports in manufactured goods, energy, farm shipments and services will come over two years on top of the $130 billion in goods and $57.6 billion in services that the U.S. sent to China in 2017 -- the year before the trade war started and exports were hit by Beijing’s retaliatory measures to President Donald Trump’s tariffs.But the list of goods categories in the agreement covers a narrower group of exports to China that added up to $78.8 billion in 2017, or $51.6 billion less than the overall goods exports to the Asian nation that year, according to a Bloomberg Economics analysis of the data. The goods trade commitment makes up $162.1 billion of the $200 billion total, with $37.9 billion to come from a boost in services trade such as travel and insurance.The target for the first year that the deal takes effect is to add $63.9 billion in manufactured goods, agriculture and energy exports. According to Bloomberg economist Maeva Cousin’s analysis, that would be an increase of 81% over the 2017 baseline. In year two, the agreement calls for $98.2 billion surge in Chinese imports, which would require a 125% increase over 2017.Importantly for China, the accord requires those purchases to be “made at market prices based on commercial considerations,” a caveat commodities markets in particular have seized on.The office of U.S. Trade Representative Robert Lighthizer, Trump’s chief negotiator, did not respond to questions about the purchase commitments on Thursday. The administration has, however, insisted that the buying, along with the rest of the deal, is subject to an enforcement mechanism.Trump and his backers view the purchases as a well-deserved bounty for American farmers and manufacturers after decades of Chinese-made goods flooding the U.S., portraying Beijing’s promises almost as reparations. “Together, we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers, and families,” the president declared on signing day.Critics argue that such pre-ordained demand amounts to a slide into the sort of government-managed trade that U.S. presidents abandoned decades ago and the very sort of act of central planning U.S. officials have spent years trying to convince China to walk away from.The purchase plan is based on what the administration insists is a specific -- though classified -- annex of Chinese commitments. The 20-page public version of that annex lists hundreds of products and services from nuclear reactors to aircraft, printed circuits, pig iron, soybeans, crude oil and computer services but no figures for purchases.Testing Targets for Increase in Chinese ImportsBusiness groups have stopped short of calling those targets unachievable. But they have made clear they may never be met.“This is ambitious and it will create some stresses within the supply system,” said Craig Allen, the president of the U.S.-China Business Council.Among the questions remaining, Allen said, was whether China would lift its retaliatory duties on American products because U.S. tariffs will remain on some $360 billion in imports from China as Trump seeks to maintain leverage for a second phase of negotiations.Allen also made clear the overall purchase schedule left many U.S. companies uncomfortable even as they saw benefits in other parts of the deal. “The vast majority of our members are looking for no more than a level playing field in China,” Allen said. “We are not looking for quotas or special treatment.”The deal details commitments to lift non-tariff barriers on many agriculture imports such as chicken and beef and ease the way for the approval of genetically modified crop strains that have taken years in the past. It also will open up the market to credit card companies, ratings agencies and insurers. All those things should encourage trade.But for many manufacturers, what is changing remains less clear.Major exporters such as Boeing Co., whose CEO Dave Calhoun attended Wednesday’s signing ceremony, have largely stayed mum about what exactly the deal will mean for their business with China.Trump has tweeted that the deal includes a Chinese commitment to buy $16 billion to $20 billion in Boeing planes.But in a statement welcoming the deal, Boeing would only say that it was “proud that Boeing airplanes will continue to be a part of this valued relationship” with China, which is its largest international market, accounting for $13.8 billion in sales in 2018.While the People’s Republic hasn’t ordered Boeing aircraft since 2017, Chinese airlines have continued to take new aircraft from Boeing and U.S. lessors. But deliveries to China tumbled to just 45 aircraft last year from 192 jetliners in 2018 amid the trade war and after Boeing was barred from shipping the 737 Max due to a global grounding imposed after two fatal accidents.German carmaker BMW is one of the most likely candidates to benefit from a Chinese commitment to buy U.S.-made vehicles. It exported 81,000 vehicles to China from its plant in South Carolina in 2017 and saw that number fall to just over 46,000 last year, with much of that decline coming because it started production of its X3 in China.But the carmaker declined to comment on how the new deal may change its export volumes to China. In the past it has put the cost of the trade wars at 300 million euros in 2018 alone.The text specifically includes “nuclear reactors” on the list of products to be bought by China, which is building more nuclear capacity than any other country according to the World Nuclear Association data. China’s plans include at least four reactors using the AP1000 design from Westinghouse Electric Co.‘Remain Skeptical’However, China said last year that it was starting to favor a homegrown reactor design for new power plants. And Westinghouse, which went bankrupt in 2017 and was later bought, has said it is now more focused on supplying components and taking apart decommissioned reactors than on selling reactors.“I remain skeptical of any significant U.S. exports of nuclear technology to China except for possibly fuel for the AP1000 reactors,” Chris Gadomski, BloombergNEF nuclear analyst, said by email. A Westinghouse spokeswoman said Thursday she wasn’t even aware that the deal included nuclear reactors.Intriguingly, Trump’s new China pact includes plans for exports of American iron and steel, a potential gain for an industry close to the president that has benefited from his tariffs and complained about Chinese production and overcapacity for years.The text of the agreement lists iron and steel products ranging from pig iron to stainless steel wire and railway tracks, but steel industry sources said they had been caught by surprise and not been given any additional details on China’s purchase commitments.U.S. Steel Corp. and Cleveland-Cliffs Inc. -- the biggest U.S. iron-ore producer -- declined to comment. China produces more than 50% of the world’s steel, and has drawn criticism from around the world for flooding global markets with cheap steel.To contact the reporters on this story: Shawn Donnan in Washington at email@example.com;Julie Johnsson in Chicago at firstname.lastname@example.org;Joe Deaux in New York at email@example.com;Will Wade in New York at firstname.lastname@example.org;Gabrielle Coppola in New York at email@example.comTo contact the editors responsible for this story: Brendan Murray at firstname.lastname@example.org, Ana MonteiroFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.Leaders in Wichita, Kansas, suffered a series of gut punches in recent weeks after their biggest employer, Spirit AeroSystems, said it would stop working on the troubled Boeing 737 Max jetliner and later announced 2,800 layoffs in its home city.City manager Robert Layton is sitting through two or three meetings a week on what to expect, as fallout from the Max’s temporary shut-down ripples through the aircraft’s 600 mostly U.S. suppliers. Republican Senator Jerry Moran of Kansas promptly called Boeing’s new chief executive and the head of the Federal Aviation Administration to urge them to get the Max flying again. The new mayor of Wichita -- a city of 380,000 that claims to be the “Air Capital of the World” -- just took office on Monday, three days after Spirit announced its mass layoffs.Boeing is the largest manufacturer and exporter in the U.S. Its stumble, which started with the fatal crashes of two 737 Max aircraft and culminated in the grounding of its best-selling Max fleet last March, could have repercussions for the entire U.S. economy.Treasury Secretary Steven Mnuchin has said the company’s problems could cut U.S. gross domestic product by half a percentage point this year -- a figure repeated by President Donald Trump on Wednesday.While Wichita tries to suss out what’s to come, aviation supply chain experts warn that the numerous suppliers could fail causing major job losses if the U.S. industrial titan allows the Max program’s shutdown to linger much past this month. Boeing shares have fallen about 25% from a record high on March 1.“I would not be surprised that smaller suppliers end up going out of business, because they’re two, three levels down,” said Gary Weissel at consultancy Tronos Aviation Consulting. “The guys above them can’t take deliveries.”That could prove a hurdle for Trump as he makes his case for reelection on the strength of the economy and his record on job creation, although Boeing’s biggest supplier bases in Kansas and Washington are in deeply red and blue states, respectively.“With the shutdown, there could be political pressure exerted in the FAA’s direction to get things moving,” said Kevin Michaels, a managing director at consultancy AeroDynamic Advisory.So far, there’s been relatively little bloodletting at Boeing’s suppliers throughout the Max’s 10-month grounding. Several Max suppliers didn’t return calls to discuss the potential impact on their businesses, while the Pacific Northwest Aerospace Alliance, a collection of aviation companies, declined to comment.”We are working with local and state organizations to help provide information about available opportunities and resources to employees who need them,” a Spirit spokeswoman said.‘Delicate Balancing Act’Still, there have been relatively few job cuts to date because, until now, Boeing had kept producing 42 Max planes a month, down only slightly from its previous rate of 52 a month. That probably will change now that Boeing suspended production of the model this month, analysts said.Moody’s Investors Service in a Jan. 10 report identified 24 Max suppliers whose credit it had previously rated. Big suppliers like Precision Castparts Corp. and Honeywell International Inc. are best suited to withstand the shutdown, while smaller companies could face the most financial stress, according to Moody’s.“Each supplier will face a delicate balancing act involving efforts to quickly reduce overhead costs,” while making sure it’s able to ramp up again when Boeing restarts production, Moody’s wrote.Boeing is talking with suppliers about ways that it can mitigate their challenges through “delivery rate options,” a company spokesman said, without giving further details.In Wichita, community leaders are trying to diversify their economy so it’s not so dependent on aviation. Aerospace hit its peak in Wichita in 2008 at more than 40,000 jobs, but by 2017 employment had fallen by a third to about 26,000.The 2,800 layoffs at Spirit, which makes aircraft fuselages and other major components, is expected to cut into the area’s wages by around $220 million, although unemployment insurance would offset some of that, said Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University.The loss of such valuable jobs would deal a blow to the Wichita economy. Average aerospace positions in the community pays $80,000 a year, or almost double the average for all industries.(Updates with comment from Spirit AeroSystems)\--With assistance from Siddharth Philip.To contact the reporter on this story: Michael Sasso in Atlanta at email@example.comTo contact the editors responsible for this story: Sarah McGregor at firstname.lastname@example.org, Anita SharpeFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The 2019 column I most wish I could take back was about Boeing. In May, two months after the second deadly 737 Max crash, I compared Boeing’s current troubles to other times when Boeing had stumbled badly, including 2013, when the new 787 — which had come to market four years behind schedule —had a problem with its lithium ion batteries, which burst into flames several times. The Federal Aviation Administration even grounded the plane temporarily.Airplanes are fiendishly complex, and new planes almost always have kinks that need to be worked out (though, admittedly, those kinks don’t usually include fatalities). In any case, my working assumption was that the company had always overcome its problems and would do so again. “Boeing’s history strongly suggests that it will recover from this fiasco and do so quickly,” I wrote. “It will emerge stronger than ever.” Ouch.Within a matter of months, I could see that I was wrong and that Boeing was not the same company I had followed two decades earlier. In October, Chief Executive Officer Dennis Muilenberg testified before Congress. He was awful. He kept saying that safety was part of Boeing’s DNA, yet the evidence angry legislators confronted him with — internal emails, for the most part — suggested just the opposite: that safety was no longer high on Boeing’s list of priorities. What was ascendant was maximizing shareholder value, with catastrophic consequences.The company cut corners to get the plane on the market quickly. It used the least expensive suppliers regardless of how inexperienced they were. Its manual contained only one sentence about the system that was the root cause of the crashes. Worst of all, it persuaded the F.A.A. — and its airline customers — that pilots didn’t need flight simulator training to fly the 737 Max. The release of a devastating batch of internal Boeing emails late last week — showing engineers rushing to get a plane to market despite knowing it had serious problems — only reinforced the notion that Boeing’s culture had been compromised. A company that had long been run by engineers for engineers was now a company run by corporate bureaucrats whose primary goal was to please Wall Street. That’s the underlying story those emails tell.Which begs the question: How did this happen?In the Atlantic not long ago, business writer Jerry Useem suggests an answer. He marks May 2001 as the beginning of Boeing’s cultural decline; that month, top executives announced that they were moving the company’s headquarters to Chicago. More than 30,000 engineers would remain in Seattle, mind you. But the top 500 executives would move 2,000 miles away.“When the headquarters is located in proximity to a principal business — as ours was in Seattle — the corporate center is inevitably drawn into day-to-day business operations,” CEO Phil Condit said at the time. How he could view removing the top brass from the “day-to-day business operations” as a net positive is beyond comprehension. But he did. Useem wrote: “The present 737 Max disaster can be traced back … to the moment Boeing’s leadership decided to divorce itself from the firm’s own culture.”Condit was ousted in 2003 (in part because he had a series of affairs with female employees) and was succeeded by Harry Stonecipher. Stonecipher, who had been CEO of McDonnell Douglas when it merged with Boeing in 1997, had spent the bulk of his career at General Electric, including seven years under Jack Welch. As I’ve noted before, Welch’s stated goal was to make GE “the world’s most valuable company,” which meant focusing first and foremost on finding ways to increase the company’s share price. As his underlings took over other companies, they brought that mindset with them.Stonecipher was no exception. At Boeing, he gained a reputation as a ruthless cost-cutter and expressed pride in the way he was blowing up the company’s engineering mindset. (“When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm,” he once said.) Wall Street loved it; the stock price rose fourfold.When Stonecipher was fired in 2005 (also for having an affair with a subordinate), the board passed over the obvious internal candidate, Alan Mulally, the head of the commercial airplane division and Boeing’s last great engineering executive, and brought in another Jack Welch protege, James McNerney. So now Boeing had a CEO who knew nothing about how to manufacture an airplane. And this lack of engineering know-how was compounded when McNerney named Scott Carson to succeed Mulally, who left in 2006 to become CEO of Ford Motor Co. True, Carson was a Boeing lifer, but he was a salesman, not an engineer.In 2007, McNerney inaugurated a series of stock buyback plans, which lifted the stock price; it repurchased $6 billion worth of shares in 2014 alone. The CEO and other top executives received tens of millions of dollars’ worth of stock options and stock grants. Dividends were doubled. The stock bottomed out at $30 a share in the aftermath of the financial crisis, but by the time McNerney stepped down, it was approaching $150 a share.Meanwhile, Boeing was putting the screws to its unions, eliminating their pensions and moving some production to a nonunion facility in South Carolina. Richard Aboulafia, the well-known aviation consultant, thinks this was a critical mistake — and another example of how little McNerney understood about the business of building airplanes.“Aviation is not like other industries,” he wrote in Forbes after McNerney announced his retirement. “There are certainly cost pressures, but this is a capital-intensive business with very high barriers to entry. Labor costs just don’t matter as much compared to other industries.”Aboulafia concluded: “An experienced and motivated workforce, therefore, is the most important asset a company has. McNerney failed to recognize this important fact, and the company has suffered as a result.”In that same essay, Aboulafia noted that the incoming CEO, Muilenberg, was an aviation engineer, and though he had spent his career on the defense side of the company, there was hope that he could reverse some of McNerney’s emphasis on the stock price. But it wasn’t to be. Instead, he ratcheted up the company’s stock buybacks, retiring 200 million shares — a quarter of the company’s stock — at cost of $43 billion.How could Boeing afford to do that? As Jonathan Ford pointed out last August in the Financial Times, it was precisely because it was saving so much money on the 737 Max. Instead of starting from scratch and building a new plane, it simply “bolted new fuel-efficient engines onto a tweaked existing airframe.” Ford concluded: “Boeing was able to redirect some of those ‘savings’ to repurchase stock instead.”By the time Boeing decided to cobble together the 737 Max, its engineering culture was completely broken. Here’s how Aboulafia described it to Useem in the Atlantic:It was the ability to comfortably interact with an engineer who in turn feels comfortable telling you their reservations, versus calling a manager [more than] 1,500 miles away who you know has a reputation for wanting to take your pension away. It’s a very different dynamic. As a recipe for disempowering engineers in particular, you couldn’t come up with a better format.You can see that disempowerment — and its consequences — in the recently released emails. Instead of bringing their fears and complaints to superiors, the engineers grouse to themselves about the problems they see with the plane. They are bitter about management’s unwillingness to slow things down, to build the plane properly, to take the care that’s required to prevent tragedy from striking.There is one email in particular(1) from an unidentified Boeing engineer that I can’t get out of my head. It was written in June 2018, about a year after the company had begun shipping the 737 Max to customers:Everyone has it in their head that meeting schedule is most important because that’s what Leadership pressures and messages. All the messages are about meeting schedule, not delivering quality… .We put ourselves in this position by picking the lowest cost supplier and signing up to impossible schedules. Why did the lowest ranking and most unproven supplier receive the contract? Solely based on bottom dollar…. Supplier management drives all these decisions — yet we can’t even keep one person doing the same job in SM for more than 6 months to a year. They don’t know this business and those that do don’t have the appropriate level of input… .I don’t know how to fix these things … it’s systemic. It’s culture. It’s the fact that we have a senior leadership team that understand very little about the business and yet are driving us to certain objectives. It’s lots of individual groups that aren’t working closely and being accountable …. Sometimes you have to let things fail big so that everyone can identify a problem … maybe that’s what needs to happen instead of continuing to just scrape by.Of course that’s exactly what happened: the 737 Max failed big — at a cost of 346 lives. Shareholder value has caused much harm in the three decades since it became the core value of American capitalism: diabetics who can’t afford insulin; students ripped off by for-profit universities; patients gouged by hospital chains; and so much else. But none worse than this.(Corrects the given name of aviation consultant Richard Aboulafia in the 13th paragraph.)(1) The email in question can be found on page 24 of this document.To contact the author of this story: Joe Nocera at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
China's Xiamen Airlines, a long-time Boeing operator, is looking to bring 10 Airbus A321neo aircraft to its fleet, as the carrier grapples with the financial impact from the 737 MAX grounding and persistent trade uncertainties. The carrier, a subsidiary of state-owned China Southern Airlines , is inviting leasing companies to bid to supply these jets, which are to be delivered from the second half of 2021 to 2023, the Chinese airline said in a statement on its website. The announcement deals another setback to the U.S. manufacturer, whose best-selling model Boeing 737 MAX remained grounded for about 10 months, following two fatal crashes that killed a total of 346 people.
An expert committee on Thursday recommended the Federal Aviation Administration require Boeing Co and other aircraft manufacturers to adopt new safety management tools in the wake of two fatal Boeing 737 MAX crashes that killed 346 people. Boeing grounded its entire 737 Max fleet, halting deliveries of its best selling commercial airliner, after an Ethiopian Airlines flight crashed in March last year. It was the second 737 Max to crash in a matter of months.
(Bloomberg Opinion) -- The billionaire bromance between Donald Trump and France’s richest man, Bernard Arnault, has surely been one of the more unexpected consequences of the U.S. president’s global trade war. Back in October, Trump lavished praise on the king of luxury — calling him by turns an artist, a great businessman and a gentleman — after LVMH Moet Hennessy Louis Vuitton SE opened a handbag factory in Texas. The symbolism was rich, considering Trump had just days earlier removed leather goods from a list of European products worth $7.5 billion that were hit with higher U.S. import tariffs. Trump wasted no time in spelling out the link: “I can’t tax him, because he moved to the United States.”The mood has cooled since then. Leather handbags and luxury items worth $2.4 billion are now back on the U.S. president’s hit list as part of potential tariffs targeting France, which the White House says is discriminating against U.S. firms such as Apple Inc., Facebook Inc. and Amazon.com Inc. with a new digital-services tax. The U.S. has also threatened more tariffs targeting the European Union related to the long-running dispute over aircraft subsidies between Boeing Co. and Airbus SE. Brussels has dispatched its top trade official this week to try to calm tensions, but there’s every chance the spat could worsen. For a president fighting impeachment and campaigning for re-election, French wines and German cars are tempting political targets.That has put Trump-whisperers like Arnault in an awkward position. While by no means the chief culprit of the EU’s trade surplus with the U.S. that Trump so hates, luxury products sold by LVMH such as wine and spirits are France’s key export sector after aerospace. The U.S. market brings in about 24% of the group’s revenue, almost as much as France and Europe put together. Shrewd re-jigging of the supply chain, and the luxury industry’s ability to pass on price increases to its well-heeled buyers, have so far helped keep the wolf from the door. LVMH’s pledge to create 1,000 jobs in Texas, even if a “Made In the USA” label leads to upturned noses, has made Trump less likely to want to penalize the company with luxury levies. He’s also less likely to oppose Arnault’s proposed $16 billion acquisition of iconic U.S. jeweler Tiffany & Co.It’s not just LVMH: Airbus, one of Trump’s favorite punching bags and the biggest brand in European aerospace, pulled off a similar feat. Its local presence in Alabama has spared the aircraft it produces in the U.S. from the 10% EU tariffs (and likely deterred Trump from pricier duties). Considering France is being singled out for harsher punishment, the fact that Paris-listed LVMH and Airbus are among the top five best-performing euro-area blue-chip stocks since Trump arrived in the White House will comfort French President Emmanuel Macron.But how much longer can moving resources into the U.S. keep delivering results? Airbus is scrambling to continue ramping up production in Alabama, where its investment now totals $1 billion, but that hasn’t been enough to silence the threat of higher tariffs. For the luxury-goods sector, not everything “Made in France” can be “Made in the USA.” LVMH is clever enough to sell locally-made U.S. sparkling wine in funky single-serve bottles, but it will never be the same as champagne. European corporate takeovers of U.S. targets, while rising, are vulnerable to Trump’s unpredictability.Europe’s top multinationals may have also been helped by the fact that Trump’s focus so far has been primarily on China. Being a secondary target hasn’t been too bad for the EU: Tit-for-tat tariffs between China and the U.S. actually saw France get a total export boost to both countries worth an estimated 0.3% of GDP, according to Nomura research. (For Germany it was 0.1%.)It’s clear that exporting high-value items that are difficult to substitute, such as aircraft or luxury goods, is a natural defense against trade wars; Airbus was also helped by Boeing’s troubles. But China may now be receding into Trump’s rear-view mirror following the signing of a phase-one trade deal. If Europe takes its place as Trump’s chief concern, things will be different. While European investment into the U.S. increased by $226.1 billion in 2018, to $3.0 trillion, the U.S. trade deficit with the EU also hit a record that year. Tariffs on German cars — which would be far harder to pass on to consumers than for a bottle of Dom Perignon, or an A320 airplane — remain an ugly prospect, even after an increase in their local U.S. production over the past decade.Europe’s CEOs will be praying the EU can convince the White House that an escalation in tariffs would hurt American jobs, saddle the consumer with higher prices and deter hiring and investment. If that’s not enough, then maybe the next delegation the EU sends should include Arnault and the gift of a few handbags — Made in USA, of course.To contact the author of this story: Lionel Laurent at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Toyota Motor Corp. is making a $394 million investment in Joby Aviation, one of the handful of companies with the seemingly implausible goal of making electric air taxis that shuttle people over gridlocked highways and city streets.Toyota is the lead investor in Joby’s $590 million Series C funding, alongside Baillie Gifford and Global Oryx and prior backers Intel Capital, Capricorn Investment Group, JetBlue Technology Ventures, SPARX Group and its own investment arm, Toyota AI Ventures. The deal, for now, makes the Santa Cruz, California-based Joby the best-funded “eVTOL” (electric vertical take-off and landing) startup in a booming category that must overcome significant regulatory hurdles and concerns about passenger safety and noise, bringing the total money it has raised to $720 million.“Air transportation has been a long-term goal for Toyota, and while we continue our work in the automobile business, this agreement sets our sights to the sky,” said Toyota President and Chief Executive Officer Akio Toyoda. “As we take up the challenge of air transportation together with Joby, an innovator in the emerging eVTOL space, we tap the potential to revolutionize future transportation and life.”Over the past year, the 82-year Japanese automaker has deepened its interests in futuristic transportation technologies. Last year it backed Recogni Inc., a Silicon Valley maker of autonomous vehicle systems, and May Mobility, an Ann Arbor, Michigan-based operator of self-driving shuttle buses. At CES earlier this month, Toyota announced its intention to build a 175-acre community, or “Woven City”, at the base of Mount Fuji to serve as a showcase for self-driving cars and other innovations in transportation.Joby is an emerging player in a field of air-taxi companies that includes Airbus SE; South Korean automaker Hyundai, which recently announced plans to design and produce an air taxi with Uber Technologies Inc.; and Kitty Hawk, the brainchild of Alphabet co-founder Larry Page, which is developing an air taxi in conjunction with Boeing Co. Volocopter, a startup in Germany, is backed by Zhejiang Geely Holding Group Co., the biggest investor in Mercedes-Benz maker Daimler AG and owner of Swedish manufacturer Volvo and British automaker Lotus.In addition to announcing the funding, Joby released an image of its prototype aircraft. The vehicle, which looks like an oversized toy drone, sports six electric propellers and is capable of flying 150 miles on a single charge, at speeds of up to 200 miles per hour, the company said. It’s designed to carry four passengers and a pilot, an approach that differs from that of rivals such as Kitty Hawk, whose two-seat “Cora” vehicle is intended to fly autonomously, without an onboard pilot.Joby says it will manufacture prototypes at a facility in Marina, California, near Monterey, but plans to tap Toyota’s famous manufacturing prowess to build “highly reliable complex hardware at increased scale,” said Paul Sciarra, Joby’s executive chairman and a co-founder of Pinterest.In December, Joby and Uber announced a separate partnership to jointly introduce Joby air taxis in at least two cities, with customers booking and paying for flights via the Uber app.The most pressing challenge for Joby, which now has around 400 employees, is obtaining certification from the Federal Aviation Authority and other regulatory agencies around the world. Joby says this is a three- to five-year process that it formally began in 2018.Over the past few years, both the FAA and the European Union Aviation Safety Agency (EASA) have moved to support commercial development of air taxis and released special guidelines to regulate small aircraft, with rules that differ from those governing conventional helicopters and fixed-wing airplanes. Much work remains, said Robin Lineberger, head of the Aerospace & Defense practice at Deloitte, including creating a system to manage municipal airspace in both normal and poor weather conditions and building physical infrastructure such as mini-airports that can support frequent takeoffs, landings and aircraft recharging.“The 2023 to 2025 time frame is fairly straightforward” for small demonstrations, Lineberger said. But he looks to 2035 “as a practical date for having a ubiquitous operational fleet in the thousands—not the hundreds—with a well-established framework for regulatory approval.”Sciarra and Joeben Bevirt, Joby’s founder and CEO, say they’ve spent significant time with Toyoda in Toyota City, Japan, as well as with other Toyota executives at Joby’s headquarters on a windy, 500-acre ranch in the hills north of Santa Cruz. They would not say whether they offered them a ride on the prototype aircraft, but Bevirt said: “They’re a loyal and tenacious company and this has been a dream of the Toyoda family for a very long time.”To contact the author of this story: Brad Stone in San Francisco at email@example.comTo contact the editor responsible for this story: Dimitra Kessenides at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Canadian airlines are boosting the amount of flights travelling to sun destinations, according to a National Bank Financial report, although how that will affect pricing remains unclear.
Late last year, Boeing flew a key orbital flight test of its Starliner commercial crew spacecraft, a key test prior to the vehicle being able to actually carry astronauts on board. Boeing cut together footage from each part of the flight (including immediately following the timer mishap), from cameras both trained on one of the capsule's windows for an outside look, as well as interior angles that show the dummy astronaut used on the mission to see how a real human would fare on board. Eventually, Boeing says it'll release all of the footage capture on board during the mission, a good measure of transparency and the right move, given that the provider has to convince NASA and the general public that its commercial crew craft is totally safe for astronauts to climb aboard for their first orbital flight, which will hopefully take place sometime later this year.
U.S. President Donald Trump on Wednesday urged Boeing Co to move quickly to resolve issues with the grounded 737 MAX, noting the planemaker's significant impact on the U.S. economy. The Trump administration said China agreed to buy $77.7 billion (60 billion pounds) in manufactured goods over two years, including aircraft, but did not disclose how much would be in new planes. Chicago-based Boeing calls itself the top U.S. exporter.
Stocks closed lower on Tuesday afternoon after reports that the U.S. would not be rolling back tariffs on China until after the 2020 presidential elections. One expert is pessimistic that relations between the two countries will improve anytime soon.
The chief executive of Qatar Airways and a past critic of Boeing managers welcomed on Wednesday this month's change at the helm of the U.S. planemaker as it deals with the grounding of its 737 MAX model following two fatal crashes. Boeing appointed David Calhoun, a former General Electric executive who has been on the Boeing board since 2009, as chief executive and president. Qatar Airways CEO Akbar al-Baker, who heads one of the Middle East's largest carriers, is a major Boeing customer but has been critical of Boeing and its rival Airbus in the past.
Boeing (BA) could only manage to deliver 380 aircraft in 2019 compared to Airbus, which successfully delivered a record 863 commercial aircraft.
KUALA LUMPUR/SYDNEY (Reuters) - Malaysia Airlines said on Wednesday it had suspended deliveries of 25 Boeing Co 737 MAX jets, citing the plane's delayed return to service since it was grounded last year following two fatal crashes. The decision represents another setback for Boeing, which on Tuesday reported its worst annual net orders in decades, along with its lowest number of plane deliveries in 11 years, as the grounding of the 737 MAX saw it fall far behind main competitor Airbus SE . "In view of the production stoppage and the delayed return to service of the 737-MAX, Malaysia Airlines has suspended the delivery of its orders," the airline said in an email, without saying when it wanted the deliveries to resume.