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Boeing to Take $350-Million Earnings Charge

April 10, 1998|From Associated Press

Boeing Co. said Thursday that production problems with its new models of 737 jetliners will force it to take a $350-million pretax charge against first-quarter earnings.

That comes after the $700 million the company wrote off for the third quarter of last year for that program.

Boeing said flight tests and certification requirements show unexpectedly extensive changes are needed for the aircraft.

Making the changes in the aircraft and juggling other work requires more resources and overtime as the company speeds up the rate of production, Boeing Chairman and Chief Executive Phil Condit said.

In addition, he said changes in the projected mix of the models being offered for sale and smaller price increases reduced revenue estimates for the first 400 units.

The production rate for new-model 737s is scheduled to increase in the second quarter from seven planes per month to 14, and then to 21 per month later this year.

Excluding the latest write-off, Boeing expects pretax earnings of $400 to $450 million for the first quarter, the company said Thursday. Boeing's quarterly earnings will be released April 22.

For the third quarter, Boeing reported a $696-million loss and said production problems would cost Boeing $2.6 billion over the coming year.

Of that, $1.6 billion was written off in the third quarter for problems with the next-generation 737 program. The remaining $1 billion was for all other delivery programs.

Cost and schedule performance on other commercial aircraft models continue to be close to recovery plans, Boeing said.

"We are making progress and focusing our energies to get back to full production health in 1998 on all of our commercial programs," Condit said.

Boeing shares fell 6 cents to close at $55.19 on the New York Stock Exchange.

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