Boeings Secret Risks. $BA $AMZN #IAMAW #sneakycorporatestuff

Boeing (NYSE:BA) has been handed an early Christmas present. The over priced machinist union has rejected the latest contract. The union membership has played Russian roulette. They clearly do not understand how to spell South Carolina, Texas and a few other key words.

Boeing will almost certainly move work to other friendlier locations. The Washington based machinist union IAMAW (International Association of Machinists and Aerospace Workers ) will call in their political contacts for a variety of blocking moves.

The risks are now purely political. Boeing has crossed swords in the past with Obama loyal bureaucrats. So here are a few of the weapons that Obama will try to use.

Expect more investigations into how Boeing does business with Washington DC. Senate inquiries, bureaucratic inquiries, not returning phone calls and generally slowing things down. Uncle Sam has a huge spending problem and if the work is not going to a Democratic friendly union they will try to cut spending.

Not what the Tea Party had in mind. But in the ensuing three years until a new President is elected the Democratic party will try to create whatever turbulence they can.

Expect lots of political noise. Expect delays and supposed cut backs. Expect political interference. But in the end Boeing will have a lower cost structure. So sad for Seattle.

Amazon (Nasdaq:AMZN) will not be able to fill in the gap.

George Gutowski writes from a Caveat Emptor Perspective.

Boeing Crash and Burn $BA

Boeing (NYSE:BA) my my my. Despite recent news reports and market commentary Boeing is doing rather well. Earnings and revenues are up. Deliveries are still strong. Margins are improving. Passenger air travel will increase driving demand for fuel-efficient new aircraft.

Everything is peachy keen good. No worries. Just buy a little bit more. Yes all the metrics everyone is talking about are positive. so lets talk about the 800 lb gorilla sitting in the room that can disrupt everything.

Oil or more precisely jet fuel JP4 if I have the nomenclature correct.

If oil jumps and stays up the cost or air travel will increase. People will cut back on air travel. air lines will cut back on order purchases etc etc etc.

So its nice to follow the Boeing story. The 787 Dreamliner with its carbon body that flexes on take off is very sexy.

But it comes down to the price of oil which is a geo-political risk that even the most astute and sophisticated businessman cannot manage around.

So yes the new fleet is more fuel-efficient. But a terrorist can drive up the price of oil faster than an engineer can wring fuel efficiency out of the technology.

George Gutowski writes from a caveat emptor perspective.

22 Possible Black Swan Events for Boeing $BA #caveatemptorperspective

Boeing (NYSE:BA) has twenty-two (22) possible Black Swan events. Most big cap companies play CYA and publish possible risks to the business. The list is meant to mitigate any possible exposure to litigation by disgruntled shareholders who may choose to believe they were not sufficiently informed. Once you get past the boiler plate style the fundamental investor will appreciate the twenty-two (22) possible Black Swan Events as an analytical framework for the Buy-Sell-Hold or Ignore Matrix. Remember only the paranoid survive.

  1. general conditions in the economy and industry, including those due to regulatory changes;
  2. reliance on commercial airline customers;
  3. the overall health of  aircraft production system, planned production rate increases across multiple commercial airline programs, commercial development and derivative aircraft programs, and aircraft being subject to stringent performance and reliability standards;
  4. changing acquisition priorities of the U.S. government;
  5. dependence on U.S. government contracts;
  6. reliance on fixed-price contracts;
  7. reliance on cost-type contracts;
  8. uncertainties concerning contracts that include in-orbit incentive payments;
  9. dependence on subcontractors and suppliers, as well as the availability of raw materials,
  10. changes in accounting estimates;
  11. changes in the competitive landscape in our markets;
  12. non-U.S. operations, including sales to non-U.S. customers;
  13. potential adverse developments in new or pending litigation and/or government investigations;
  14. customer and aircraft concentration in Boeing Capital’s customer financing portfolio;
  15. changes in ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments;
  16. realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures;
  17. the adequacy of insurance coverage to cover significant risk exposures;
  18. potential business disruptions, including those related to physical security threats, information technology or cyber-attacks or natural disasters;
  19. work stoppages or other labor disruptions;
  20. significant changes in discount rates and actual investment return on pension assets;
  21. potential environmental liabilities; and
  22. threats to the security of Boeing and/or customers’ information.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti . Follow his evil twin brother who writes Wall Street Murder Thrillers @georgegutowski

Honeywell should increase Dividend! $HON Will Management Send the Signal?

Honeywell (NYSE:HON) produced some very nice earnings. Not a flashy stock with a lot if noise it treated as an old school industrial. However looking at its markets of transportation and aeronautics it really is a high-tech business with large moats. not everyone can just start installing parts onto an aircraft carrying hundreds of passengers.

The proof or validation for the earning will be an increase in dividend. When you are firing on all cylinders as Honeywell is shareholders need to be rewarded. Current yield is just under 2%. Free cash flow for the past two years has not been stellar. But cash on hand has been rising.

If management and the board are shareholder conscious they will increase the dividend and play to the buy and hold investors. so far no signals from management. Why is that?

George Gutowski writes from a caveat emptor perspective.

Fedex Trojan Horse actions louder than words Cancelled jets trump earnings $FDX $BA

Tail of a FedEx Boeing 727.

Image via Wikipedia

Fedex (NYSE:FDX) reported strong Q2 earnings. They attribute their numbers to stong yield management and home delivery. But at the same time they are cancelling, rejuggling and then placing new orders for different types of Boeing (NYSE:BA)  aircraft. Actions speak louder than words. The aircraft represent huge infrastructure growth. By making such major changes their business model is changing. Connecting the aircraft orders with earnings is a way to hide facts in plan view. Management needs to provide more colour on the meaning of the infrastructure changes where the big money is being made.

George Gutowski writes from a caveat emptor perspective.

American Airlines strange patriotism $AMR #boeing737 #airbusa320 #unions

departing LAX

Image via Wikipedia

American Airlines (NYSE:AMR) announced it was splitting its fleet between Boeing (NYSE:BA) and Airbus, EADS (EAD). After 911 airlines were bankrupt and needed all sorts of support from the American people. Now when the big order goes in workers in Toulouse France and Hamburg Germany will be enjoying some overtime. Less money in the US economy thanks a lot.

But wait a minute lets take a closer look. AMR trades around $5 @ share. The fundamentals are not compelling. They have a huge union legacy issue; especially with the heavily unionized repair facility that American maintains. The repair facility is exclusively Boeing oriented because that’s all American has in the air. Where will the Airbus be maintained? Which union picks up the work? Opportunity to cut or eliminate legacy costs?

Then look at the battle of the options. Both contracts have huge options to buy more aircraft. Each manufacturer wants the options exercised thereby adding to the order backlog. Now you have some old-fashioned competition. Boeing and Airbus will compete heavily against each other with American being the beneficiary.Of course if American does not survive,  the manufacturing hit is partly exported to Europe and the Boeing guys do not hurt as much.

Aircraft manufacturing is also a huge political football. Boeing will be watching sneaky European subsidies affecting the American Airlines deal. Boeing is in a political fight with the Obama Administration about their right to open new manufacturing facilities in South Carolina. Sure they will manufacture 787s there but when it’s political it becomes quite the mess.

So fly the friendly skies and keep your seat belt buckled at all times.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours. When I fly I am more motivated by schedule and on time performance. I usually do not care much about which airliner I’m in. Attentive stewardesses are always appreciated.

Boeings Wild Card Cost Issues


Image by prayitno via Flickr

Boeing (BA) investors have died a death of a thousand cuts. 787 delays and problems continue to be vexatious. I am sure that on a technical level they are diligently working to fix it. Management is trying to sooth investors by claiming that late delivery fees are within expectations. But the margins for 2011 787 and 747-8 deliveries are nill. Boeing worked for free. Not good.

On a certain level you need to get costs behind you. Short term pain long-term gain has always made sense. The two wild cards in margins and profitability are unexpected costs and further cancellation or delay fees.

The fixes that Boeing is looking to will continue to be expensive. The engineers have a mandate to fix not save nickels. The near term desperation will adversely affect margins. Also while Boeing may be managing cancellation and late fees ona cash basis we have no idea what they are promising for future prices allowing customers to average down. This is further risk of the pricing compression variety.

Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I do not intend to initiate any in the next 72 hours.