Analyst: Boeing Needs To Improve Labor Relations To Bring Down 787 Costs
Aviation analyst Richard Aboulafia says there’s a risk that Boeing’s 787 program might never be profitable. That’s because the airplane maker has accumulated $26 billion in production costs that it’s deferred into the future.
Aboulafia says the total deferred production costs for Boeing’s Dreamliner program will probably climb to $30 billion or so.
He says what we’re seeing with those mounting costs is that employees are alienated after the company waged two contentious battles with its biggest labor unions in the past few years.
"I can tell you the one thing they’ve done consistently is squeeze, squeeze, squeeze and expect better results," Aboulafia said in an interview at the Pacific Northwest Aerospace Alliance annual conference. "Now if you go back and say, 'Hey, let’s do this as a partnership the way they do at some car companies and some other industries. Let’s work together. We’re going to make it good. You’ll be motivated,' they might get much better results."
Aboulafia says the company could offer more profit sharing or incentive bonuses to help motivate workers to bring down costs.
Boeing says this year the 787 program will turn cash flow positive, meaning each plane on average will bring in more cash than it costs to build.
So far those ballooning deferred costs haven’t hurt the stock. Boeing shares have risen 16 percent over the past year.