Boeing CFO Implements Caution: 737 Production to Stay Below 38 per Month

Boeing’s CFO decided to limit 737 production below 38 per month, emphasizing a cautious approach without rushing. The impact will be felt over the next several months.

Brian West, the Chief Financial Officer (CFO) of Boeing, has acknowledged the company’s commitment to enhancing quality standards. West stated that Boeing will intentionally limit the production rates of the 737 for the coming months as part of its strategy to enhance quality.

Boeing is intentionally limiting 737 rates for the upcoming months to enhance quality.

The CFO of Boeing stated that they’ve chosen to limit 737 production to below 38 per month, emphasizing a cautious approach without rushing or going too fast. They also mentioned that the effects of this production constraint will be felt over the coming months.

Boeing $BA shares facing downward pressure as CFO presents at BofA event, outlining a prudent strategy moving forward.

– Strive to restore BCA margins to their historical levels by ’25-’26.

– Emphasize maintaining a stable factory for financial security.

– Willing to consider a Spirit $SPR deal with a combination of cash and debt.

– Targeting a $10 billion free cash flow in the latter half of 2025-26.

– Predicted negative commercial aircraft margins for 2024, with a -20% in Q1.

– Opted to cap 737 production at less than 38 per month, prioritizing enhancements in 737 production quality.

– Continual discussions with customers regarding compensation for delays.

– Robust defense portfolio, with few assets earmarked for potential sale.

– Moving away from fixed-price development programs; timelines for 737 MAX 7 and MAX 10 unchanged.

– Targeting the introduction of SAF-compliant aircraft by 2030 and enhanced fuel efficiency for upcoming platforms.

Boeing expects increased cash outflow in Q1 due to decreased production of the 737 and intensified quality control efforts. With production reduced to under 38 aircraft per month to meet FAA regulations, the company aims to enhance manufacturing standards following a recent incident involving a 737 MAX 9 door plug. This adjustment could result in a cash burn ranging from $4 billion to $4.5 billion, exceeding earlier forecasts from January. Boeing will prioritize quality improvements over speed, considering funding acquisitions through a combination of cash and debt.

FAA Administrator Mike Whitaker emphasized that Boeing will be allowed to increase production only once it demonstrates the safe operation of its quality system.

Whitaker stressed that the schedule for ramping up production hinges on Boeing’s ability to successfully enact changes in its safety culture and elevate its quality standards. The FAA has set a 90-day deadline for Boeing to devise a thorough plan to tackle systemic quality-control concerns and establish benchmarks.

Following a mid-air emergency on an Alaska Airlines jet, the FAA had, for the first time, intervened to halt Boeing from boosting 737 MAX production. FAA Administrator Mike Whitaker clarified that the agency will authorize a production increase solely upon Boeing’s demonstration of effectively managing a safe quality system.

In addition to the FAA’s scrutiny, the Justice Department has initiated a criminal investigation into the mid-air 737 MAX 9 cabin panel blowout incident in January. With heightened attention on the safety of its aircraft, Boeing is under significant scrutiny, highlighting the urgent need for the company to implement comprehensive measures to tackle these concerns.

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