787 delay could wind up costing Boeing $1 billion

Penalties paid to customers may hit $200M, top analyst says


"We were surprised on the physical reality of some of the things that we received from suppliers versus the documentation," he said.

More production workers though "not a large number" will be added in Everett in the weeks ahead, McNerney said. And program executives have sent hundreds of manufacturing engineers and parts-procurement experts to the major 787 partners to help fix the supply chain.

Pat Shanahan, a hotshot company troubleshooter appointed last week to take over program leadership, "has already hit the ground running and is fully immersed in leading the team," McNerney said.

Shanahan is credited most recently with turning around a series of troubled defense-side programs, including the Chinook helicopter, the V-22 Osprey tiltrotor and ground-based missile-defense programs.

Boeing's projected cash flow in 2008 is now reduced by $4 billion. CFO Bell said about $2.5 billion of that is due to the loss of revenue from having to push back the delivery of about 35 Dreamliners from 2008 to 2009.

But he said most of that revenue will be added back in 2009 as deliveries recover almost to the original schedule.

The corporate leadership bumped up Boeing's 2008 research-and-development spending by $400 million. Half of that is to fund extra work on the 787.

The other $200 million goes to the defense division, to fund programs including the Air Force refueling tanker.

Bell said Boeing can maintain its profit forecast even with the reduced income because of productivity gains in the factories, moves at the corporate level to snip compensation and pension expenses, and some cushion built into the projections.

With 710 firm orders already booked, McNerney said the 787's business case remains "very compelling."

The latest 787 plan reinserts some cushion back into the schedule, so that if problems arise in flight tests, there's some room to deal with them. But McNerney said Boeing still plans a packed flight test schedule, with pilots flying 24/7.

"We have kept that kind of intensity but reinserted normal margins for hiccups."

Despite all the reassurances, Boeing's shares slid 69 cents to $94.26, after slipping as much as $1.50 earlier in the day.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

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