Defense/Aerospace Industries

[DewDiligence]

Boeing Posts $1.56 Billion Q3 Loss

[There’s nothing good one can say about all this, IMO.]

http://online.wsj.com/article/SB10001424052748703816204574486964008811696.html

›OCTOBER 22, 2009
By ANN KEETON And PETER SANDERS

Boeing Co. Chairman and Chief Executive Jim McNerney said the company had overreached in outsourcing production on its marquee 787 Dreamliner program, leading to a string of problems and contributing to a $1.56 billion loss for the third quarter.

Mr. McNerney's comments were the most explicit acknowledgement to date about the limits of one of the company's major strategic shifts in recent years. One of the hallmarks of the Dreamliner program, which is more than two years behind schedule, was Boeing's strategy to outsource most of the work to a network of global suppliers and perform final assembly at its Washington factory.

But Mr. McNerney said problems emerged partly because engineers were scattered around the world. He said Boeing needs to bring more engineers back in house. "When you look back, you see that we lost some of the disciplines, particularly within the context of outsourcing so much of the work," he said on an earnings conference call Wednesday.

Beyond the Dreamliner, Boeing's revamped 747 jetliner also has been beset with delays. Shuffling engineers from the new 747-8 program to the Dreamliner earlier this year contributed to delays and another write-down on the new 747, which mostly is being ordered as a freighter.

Boeing recorded $3.5 billion in previously announced third-quarter charges on its 747-8 and 787 Dreamliner jets in development and on Wednesday slashed its earnings forecast for the year.

The aerospace giant faces challenges in its commercial business, but its defense side is also feeling revenue pressure. MarketWatch's Christopher Hinton reports on the company's latest results.

Mr. McNerney said Boeing's core businesses remain strong, although challenges persist in the commercial-aircraft and defense markets. He said the Dreamliner and 747-8 remain on track to be delivered to their first customers at the end of next year. While costly, the Dreamliner is expected to record a profit [maybe], unlike the 747-8 program.

Mr. McNerney said Boeing continues to evaluate the need to cut commercial-aircraft output but has no plans to reduce production of its 737. Earlier this year, Boeing reduced production for the 777, citing lower demand from airlines. The company is expected to announce in coming weeks whether it will build a second Dreamliner final assembly line at its current factory in Everett, Wash., or at a newly acquired facility in Charleston, S.C.

Boeing's finance unit will provide $800 million of financing this year, falling short of the $1 billion it had expected to provide as capital markets have opened up, Mr. McNerney said.

The Chicago-based company cut its forecast for earnings this year to between $1.35 and $1.55 a share from $4.70-$5 a share. Defense work, which accounts for nearly half of Boeing's revenue, has failed to make up for losses in commercial aircraft.

Defense rival Lockheed Martin Corp. on Tuesday posted a slight increase in profit but forecast a decline in 2010 earnings because of belt-tightening at the U.S. Defense Department.

Boeing said Wednesday that the Dreamliner remains on track to make its first test flight by year-end and its first delivery near the end of 2010. In late August, Boeing shuffled its top management, sending James Albaugh, the head of its defense unit, to Seattle to take over operations at the commercial-airplanes division. Scott Carson, who had run the unit since 2006, stepped down. The move came after a handful of top defense executives moved into high-ranking jobs at the commercial unit, mostly to oversee the struggling Dreamliner and 747-8 programs.

Morgan Stanley analyst Heidi Wood cut her rating on Boeing shares to "underweight" from "equal weight" Tuesday, worried that complex design modifications could delay the first delivery of the Dreamliner into the spring of 2011. That would put Boeing on the hook for paying additional late fees to customers.

The company has shed 7,200 workers since the start of the year and is on track to reach its stated goal of 10,000 job reductions sometime next year, Boeing said.

Boeing's $1.56 billion third-quarter loss amounted to $2.23 a share. That compares with a year-earlier profit of $695 million, or 96 cents a share. Charges reduced results by $3.59 a share.

Revenue reached $16.69 billion, up 9.1% from last year, when a machinists strike hurt sales.

The commercial-aircraft segment swung to a $2.84 billion operating loss. Sales rose 13% to $7.88 billion as higher deliveries offset lower services volume.

Defense-business revenue rose 2.9% to $8.74 billion. Defense earnings increased 3.6% to $885 million.‹

[Biowatch]

"Brazil and France in [fighter] jets talks"

Brazil negotiating with France to buy 36 fighter jets, both countries announced...

"...France's Rafale jet, built by Dassault...
"...had an "exceptional comparative advantage" because of France's guarantee to share all military technology with Brazil as part of the deal..."
etc.

Air France swaps this for purchase of military cargo planes.

http://news.bbc.co.uk/2/hi/americas/8242751.stm

[DewDiligence]

WTO Ruling Calls Airbus Aid Illegal

[But this ruling is unlikely to change the competitive landscape to a material degree, IMO.]

http://online.wsj.com/article/SB125206164068986193.html

›SEPTEMBER 5, 2009
By JOHN W. MILLER and DANIEL MICHAELS

BRUSSELS -- The World Trade Organization ruled Friday that plane maker Airbus received illegal subsidies from European governments, according to two people familiar with the matter. The WTO said in a confidential interim ruling that the preferential government loans for the A380 passenger jet constituted an illegal export subsidy, these people said.

The decision could give the U.S. government and Chicago-based Boeing Co. legal ammunition to contest future funding for Airbus, a unit of European Aeronautic Defence & Space Co.

EADS could also be forced to repay billions of dollars in past aid, although a final judgement could take several years.

Spokesmen for Boeing and EADS declined to comment.

The U.S. filed its case against the EU in 2004, contesting what the U.S. alleged was $20 billion in illegal support from European governements for Airbus to develop new models. The support was given as loans, known as launch aid.

The EU quickly responded with a case against U.S. support for Boeing. An initial ruling in that case could be months away.

U.S. trade officials consider the ruling in the case, the biggest and most expensive in the WTO's 14-year history, to be a "great victory," according to one of the people familiar with the matter.

An EU official contested that interpretation. "This report is much more complex and much more complicated" than saying the WTO ruled against EU support for the A380, the official said.

Another person familiar with the matter said the ruling doesn't categorically forbid loans from EU governments to Airbus.

EU trade spokesman Lutz Guellner said the preliminary report "is only half the story." The WTO could rule Boeing has violated trade rules in the EU's case against the U.S., analysts say.

EU governments are now in talks with EADS about providing €2.9 billion ($4.1 billion) to help Airbus develop the new long-range A350 to compete with Boeing's 787 Dreamliner.

Launch aid to the A350 wasn't covered by the finding, but U.S. officials say they plan to challenge it at the WTO.

The WTO also ruled that European funding for research and development at Airbus and for government-built infrastructure such as roads used predominantly by Airbus was illegal under trade rules, one person familiar with the case said.

The WTO published only two paper copies of its confidential report, around 1,000 pages long, for the U.S. and EU governments.

The WTO's final decision on the U.S. case against Airbus will come out next year. Analysts say the WTO ruling, which possibly won't be finalized for years, could set the framework for state assistance to airplane makers.‹

[DewDiligence]

I think BA plans to “reverse” some of the new $2.5B write-off in future quarters to artificially inflate GAAP income. Cynical? Yes, but the cynicism is warranted, IMO.

[medchal]

I don't know how long you've watched BA, and I don't know what statements led up to this, but I do know this: I've watched them for years, and they are absolute champions at coming up with a stream of lame reasons for poor performance--always "temporary" reasons, of course. One quarter they can't meet demand; the next quarter, demand suddenly slacked off; the following quarter, there's a one-time write-down; etc.; etc. They are always conning investors. The real problem might have something to do with paying their janitors $20 per hour (which they do).

[DewDiligence]

How does your bold-faced text justify a $2.5B write-off for the inventory from three planes? It looks like BA dumped more than inventory into this huge write-off. I think they’re conning investors.

[midastouch017]

Semi O/T

[Biowatch]

"However, separate from the updated program profitability assessment, the company has concluded that the initial flight-test airplanes have no commercial market value beyond the development effort due to the inordinate amount of rework and unique and extensive modifications made to those aircraft. Therefore, costs previously recorded for the first three flight-test airplanes will be reclassified from program inventory to research and development expense, resulting in an estimated non-cash charge of $2.5 billion pre-tax, or $2.21 per share, against third-quarter results. This charge will have no impact on the company's cash outlook going forward."

http://boeing.mediaroom.com/index.php?s=43&item=812

[DewDiligence]

Dreamliner?

[This skeptical piece on Boeing is from the “Lex” column of the Financial Times. I took the liberty of adding the question mark to the header.]

http://www.ft.com/cms/s/3/5d305614-9312-11de-b146-00144feabdc0.html

›August 27 2009 23:11

Aircraft windows are rounded because the square picture windows used in early passenger planes concentrated stress on the corners. Aviation history is the process of such trial and error. The problem for investors in Boeing – which on Thursday announced that its five-times delayed 787 Dreamliner will fly by year end – is that its share price has become a bet on a series of engineering and manufacturing experiments.

Investors reacted with relief to news that the long-troubled programme required only a $2.5bn charge, sending Boeing shares up by a 10th in response. It had been feared that delays would render the company’s most successful sales effort ever entirely unprofitable – because customers start to receive compensation when their planes do not arrive on time. But management insists the Dreamliner will still turn a buck and that they can hit their self-imposed deadline to satisfy the Federal Aviation Administration that the 787 is safe.

Boeing, however, does not deserve the benefit of the doubt just yet. The computer modelling that designed the plane and failed to anticipate the last set of structural problems must be suspect until physical testing is complete. A disparate supply chain is untested at steady production rates, never mind the expansion required to ramp up to the desired 10 aircraft per month in 2013.

Nor, for those willing to bet that the company gets sixth time lucky, are the shares particularly cheap. They trade on 12 times earnings that are forecast to fall for the next three years into the aerospace downturn. Looked at another way, Boeing is on 25 times the trough earnings of the last recession. Military spending – which accounts for half of sales – is under threat. And longer term its reputation has been battered. Holding on to the shares will be a trial, and possibly an error.‹

[DewDiligence]

Dreamliner to Fly in 2009 (Maybe)

[Buried amid the news on the revised timetable is the fact that BA has been unable to sell the first three Dreamliner test planes, which will cause BA to incur a $2.5B non-cash write-off in the current quarter. How can the non-sale of three planes that list for $160-170M each cost BA $2.5B? If anyone knows, please post.

Today’s CC can be accessed at http://biz.yahoo.com/cc/8/107088.html .]

http://online.wsj.com/article/SB125137695239363401.html

›After Delays, New Schedule Pressures Company to Test 787 in Short Order

AUGUST 28, 2009
By PETER SANDERS

Boeing Co. said its 787 Dreamliner would make its first test flight by year-end -- two years behind its original schedule -- and the first aircraft would be delivered by the end of 2010, ending months of speculation.

But a string of delays have already strained Boeing's credibility with airline customers and the new schedule renews pressure on the company to get its new marquee commercial airliner airborne in short order -- even as news of problems with Boeing's global manufacturing system have leaked out in recent weeks.

"We understand the need to make the best and safest aircraft possible," said All Nippon Airways Co., which is slated to receive the first Dreamliners. "However, as launch customer and future operator of the 787, the length of this further delay is a source of great dismay." The Japanese carrier has a total of 55 of the aircraft on order.

Chicago-based Boeing also said it would take a $2.5 billion charge this quarter.

Boeing investors, however, signaled confidence that the new schedule would mark an end to the years of costly delays that have plagued the Dreamliner. The aircraft was originally scheduled to make its first flight in August 2007. The postponements have cost the company millions of dollars in penalties and concessions to airlines that have been forced realign their fleets and schedules. Boeing's shares were up 8.5% in late trading on the New York Stock Exchange.

Scott Carson, chief executive of Boeing's commercial-airplane unit, said the company is working with customers on adjusting delivery schedules. Australia's Qantas Airways Ltd. earlier this year canceled some 787 orders and deferred others.

Germany's Air Berlin PLC said Thursday it is in negotiations with Boeing about the delivery schedule for its 25-plane order. Other airlines, including Qantas and Virgin Atlantic Airways Ltd. have decided to buy Airbus 330 aircraft from European Aeronautic Defence & Space Co. while awaiting their Dreamliners.

"We are very disappointed at this latest setback to Boeing's 787 program and await to hear what implications this will have for our first deliveries, currently scheduled for mid-2013," U.K.-based Virgin said Thursday.

But even with roughly 60 cancellations, Boeing has booked 850 Dreamliner orders.

Boeing booked the third-quarter, noncash $2.5 billion dollar charge for the first three of its six test aircraft, which customers have balked at purchasing because of frequent fixes. Boeing executives said they hope to sell the other three test aircraft to VIP customers.

Chief Financial Officer James Bell said on a conference call that the Dreamliner program remains profitable and that the company would update its 2010 financial projections in January.

Thursday's update on the 787 program comes more than two months after Boeing officials abruptly postponed the plane's already delayed first flight and disclosed a structural flaw where the wings meet the plane's body, which is made of composite materials.

The announcement stunned the industry and called into question the credibility of top Boeing executives, who just days before had said the plane remained on track to fly by June 30 of this year.

Since then, Boeing engineers have been working to find and implement a solution to the flaws found during May ground tests. Boeing is making fixes on six test aircraft and the first 15 production airplanes and will incorporate those fixes into the design of future aircraft, executives said on the conference call.

"We have a high degree of confidence in the fix and the time it will take," said Jim McNerney, Boeing's chairman and chief executive. The new testing and production schedule includes "some cushion...against the possibility of unknowns," he said.

Over the summer, Boeing halted work at a supplier's factory in Italy because of manufacturing difficulties. Boeing officials played down those problems, describing them as a routine part of developing a new airplane.

Though Boeing has had little difficulty selling airlines on its fuel-efficient plane, the program has been plagued with delays stemming from a parts shortage, major hiccups with its global supply chain, and a two-month strike last fall by machinists at the company's assembly facilities near Seattle.

Boeing said Thursday its manufacturing system is back on track and that it plans to produce 10 Dreamliners a month by late 2013.‹

[DewDiligence]

Makers of Military UAV’s Take Off

http://online.wsj.com/article/SB125107420171052683.html

›AUGUST 24, 2009
By AUGUST COLE

Unmanned U.S. aircraft have not only transformed the battlefields in Iraq and Afghanistan, but now are altering the defense-industry landscape, as well.

The White House's defense-budget request for fiscal 2010 includes approximately $3.5 billion for unmanned aerial vehicles.

As demand grows, the Pentagon increasingly is relying on smaller suppliers that have developed the relatively inexpensive and effective weapons systems.

Companies such as General Atomics Aeronautical Systems Inc., the maker of Predator drones, hope to hold their edge over established, deep-pocketed contractors in what has become one of the military's most critical technologies.

They also hope to become more established within the defense industry as Defense Secretary Robert Gates pushes the Pentagon and contractors to furnish troops with better intelligence and real-time surveillance.

Unmanned aerial vehicles are smaller and have less-extensive electronics systems than piloted military aircraft and don't require as much fuel, big runways or major logistics support. UAV pilots also don't require as much training as fighter jocks.

That lowers purchase and operating costs, as well as the risk to personnel. But for many missions, such as keeping enemy aircraft at bay, today's UAVs still are no match for a manned fighter.

In Afghanistan, unmanned aerial vehicles routinely provide high-quality images that were previously available only from satellites or highflying spy planes. Demand has increased in particular for General Atomics' biggest armed UAVs that not only can track targets, but can attack them as well.

According to Pentagon documents, about $1.3 billion in the 2010 budget is intended to buy the Predator's better-armed successors, the Reaper and the Sky Warrior. That is enough to purchase 60 of the General Atomics aircraft for the Air Force and the Army.

By contrast, the Pentagon is seeking $10.43 billion to buy 30 of the military's next-generation F-35 Lightning II fighter jet, which is still in development under a program led by Lockheed Martin Corp.

The largest defense contractors mostly have struggled to produce comparable combat-ready UAV technology and have turned to partnerships with and acquisitions of smaller companies.

The UAV industry, which hasn't undergone the consolidation that has occurred in the mainstream defense industry, "is like the aeronautical industry around World War II," said Steven Sliwa, the president and chief executive of Insitu, a maker of unmanned aircraft that Boeing Co. acquired last year.

Lockheed Martin, the Pentagon's biggest contractor by sales, recently tapped General Atomics to supply the defense giant with Reaper aircraft for a Navy contract. Northrop Grumman Corp. won the bidding, however.

Northrop is an exception among major defense contractors developing UAVs, with its Global Hawk, a high-altitude aircraft with a wingspan as wide as that of a jetliner.

And Boeing in June created an unmanned-airborne-systems division that includes Insitu, but the drone maker maintains a fair amount of independence. At a recent trade show in Washington, Insitu's booth was separate from the Boeing area, and Insitu executives' business cards don't feature Boeing logos.

General Atomics' Reaper, which costs between $10 million and $12 million apiece, and the smaller Predator for now are tackling the U.S. government's most sensitive missions.

Armed UAVs have enabled the U.S. to conduct airstrikes against Taliban and al Qaeda fighters, some inside Pakistan, without endangering U.S. pilots. U.S. officials have said the leader of Pakistan's Taliban was recently killed by one such strike.

UAV attacks have been subject to Pakistani criticism, however, because of civilian casualties and alleged violations of sovereignty.

Mr. Gates and senior lawmakers -- who say the Pentagon has moved too slowly in providing equipment and technological capabilities to troops in combat -- have created well-funded initiatives to urgently field new systems such as UAVs.

The military's most successful weapons in recent years, including the Global Hawk and the Predator, as well as a remote-controlled ground vehicle from iRobot Corp. called the PackBot, haven't come out of the Pentagon's traditional weapons-buying system, said Peter Singer, director of the 21st Century Defense Initiative at the Brookings Institution. The big players are "facing some major issues as homes of innovation," he said.

In a corner of the defense industry populated with small firms, General Atomics stands out. Thomas Cassidy Jr., president of the General Atomics unit making Reapers, expects the Air Force to buy as many as 375 of the drones.

The company developed the Reaper from its basic Predator model, itself a 1990s system bought by the military outside traditional weapons-procurement channels.

General Atomics, which is based in San Diego, also is at work on a faster, stealthy UAV that will avoid enemy radar in a way its predecessors can't. "It can go where Reapers and Predators can't go," Mr. Cassidy said.

Insitu's specialty, meanwhile, is surveillance. Its technology initially was used by commercial fisherman to track schools of tuna. But after the Sept. 11, 2001, terror attacks, Insitu focused more on defense.

The Marines took its systems to Iraq in 2004, where Insitu's UAVs helped watch over U.S. forces fighting in Fallujah.

Insitu is working on a plane called the Integrator, which it hopes will win a Navy contract for surveillance aircraft. Bigger firms, among them Raytheon Co., are pursuing the contract.

The Integrator carries more electronics than its smaller predecessor, the Scan Eagle, which has notched some 200,000 flight hours, according to the company.‹

[DewDiligence]

ITT Wins Defense Orders

[ITT is one of the top-10 defense contractors, but few people seem to know this. 60% of the company’s total sales come from the defense business.]

http://finance.yahoo.com/news/ITT-Corp-Wins-Defense-zacks-1863748924.html?x=0&.v=

›Friday August 21, 2009, 12:44 pm EDT

ITT Corporation (NYSE: ITT ) has been awarded $43 million follow-on orders by the U.S. Army's Research, Development and Engineering Command Acquisition Center for the Enhanced Night Vision Goggle and associated spare parts.

Enhanced Night Vision Goggle optically combines an image intensification image, and proven thermal infrared technology, allowing for improved mobility and situational awareness—through clear target detection and improved target recognition.

ITT's Night Vision business, based in Roanoke, VA, is the world's leading developer, producer and supplier of head- and helmet-mounted night vision solutions and image intensifiers for U.S. and allied military forces as well as the homeland security market.

Subsequently, ITT Corp. also received a $29.2 million contract from the U.S. Navy to produce radar modification kits used aboard Navy ships. The radars enhance missile guidance capability, while the kits will increase operational availability and decrease operating and support costs, according to the government notice.

ITT Corporation is a high-technology engineering and manufacturing company with approximately 40,000 employees. Its portfolio of businesses is aligned with enduring, global growth drivers and is spread on all seven continents in three vital markets: water and fluids management, global defense and security, and motion and flow control.‹

[DewDiligence]

A Mobile Anti-Missile System? Boeing Says, “Can Do”

http://news.yahoo.com/s/nm/20090820/pl_nm/us_missiles_usa_europe_boeing_1

›By Jim Wolf
Thu Aug 20, 1:29 am ET

HUNTSVILLE, Alabama (Reuters) – Boeing Co unveiled a surprise proposal to build a mobile interceptor missile in an effort to blunt Russian fears of possible U.S. fixed missile-defense sites in Europe.

The idea was floated on Wednesday as the Obama administration weighs Bush-era plans to put 10 ground-based interceptors, or GBIs, in underground silos in Poland, paired with a radar site in the Czech Republic, as a hedge against Iran's growing ballistic-missile clout. The review is to be wrapped up by the end of this year.

Boeing, which manages the hub of a layered U.S. anti-missile shield deployed in 2004, is eyeing a 47,500-pound interceptor that could be flown to NATO bases as needed on Boeing-built C-17 cargo planes, erected quickly on a 60-foot trailer stand and taken home when judged safe to do so.

"If a fixed site is going to be just too hard to get implemented politically or otherwise, we didn't want people to think that the only way you needed to use a GBI was in a fixed silo," Greg Hyslop, Boeing's vice president and general manager for missile defense, told Reuters at a U.S. Army-sponsored missile-defense conference in Huntsville, Alabama.

A scale model showed a two-stage interceptor designed to be globally deployable within 24 hours at designated launch sites that would provide coverage for the United States and Europe.

Boeing had just started briefing the Pentagon's Missile Defense Agency on the proposal, Hyslop said. The project could be completed by 2015 at probably less cost than had been planned for the silo-based interceptors, he said.

The Government Accountability Office reported earlier this month that military construction costs for the interceptor and radar sites could top $1 billion. U.S. intelligence officials say that by 2015 Iran will have a long-range missile capability. The Polish and Czech sites are scheduled to be ready by then.

Moscow strongly opposes the possible Polish and Czech installations as a threat to its security. After the election of Barack Obama as U.S. president in November, Russian President Dmitry Medvedev threatened to base medium-range Iskander missiles near the Polish border if the United States persisted.

Boeing is not the only U.S. contractor preparing for a possible abandonment of the Polish and Czech options. Raytheon Co, the world's biggest missile maker, said Tuesday it was developing a land-based version of its existing Standard Missile-3 (SM-3), a star of U.S. missile defense from the sea, that could be used to defend Europe, Israel and elsewhere.

A reconfigured SM-3 interceptor was successfully fired by the U.S. Navy's Aegis ballistic missile-defense system in February 2008 to destroy an errant U.S. spy satellite. Japan is co-financing and co-producing a new, more capable version. Lockheed Martin Corp, the Pentagon's No. 1 contractor by sales, builds the Aegis system.

A land-based SM-3 could play a role in European defense with or without GBIs in Poland, Michael Booen, a Raytheon vice president, told Reuters. They could be operational as soon as 2013 if funded adequately, he said. The Pentagon has requested $50 million for its development in the fiscal year starting October 1.

Army Lieutenant General Patrick O'Reilly, the head of the Pentagon's Missile Defense Agency, hailed the SM-3 option Wednesday and was asked about a mobile GBI.

"That would be a significant undertaking," he said of the GBI concept after a presentation to the conference. "But we are looking for opportunities and the SM-3 is one we focused in on because of its accomplishments."

General James Cartwright, vice chairman of the Joint Chiefs of Staff, told the session earlier in the day the United States had made "a couple of bad assumptions" in missile defense.

He singled out an expectation, at the heart of the U.S. rush to deploy, that "the emergence of the intercontinental ballistic missile threat would come much faster than it did" from countries like Iran and North Korea.

"The reality is that it has not come as fast as we thought it would come," Cartwright said. He said the United States, under its current missile-defense plans, had the capability to take on 15 inbound intercontinental ballistic missiles simultaneously using the 30 GBI's being placed in silos at Fort Greely, Alaska, and Vandenberg Air Force Base, California.

"That's a heck of a lot more than a rogue" nation could fire, he said.‹

[Biowatch]

Way OT Oshkosh 2009

[DewDiligence]

Boeing Plays Down Latest Dreamliner Flaw

http://online.wsj.com/article/SB125029235748333397.html

›AUGUST 15, 2009
By PETER SANDERS

On June 23, Boeing Co. executives confronted two problems with the much-anticipated but troubled 787 Dreamliner jet development program. One, involving problems where the plane's wings join the body, Boeing announced, drawing world-wide attention. The other, involving a problem on the 787's composite fuselage, the company kept silent about.

When news of the second problem surfaced late Thursday on an Internet blog that follows the aviation industry, it raised new questions about Boeing's public disclosure policies on the 787 program, which is the Chicago-based aerospace giant's most important development project.

Boeing on Thursday night confirmed that it had ordered some work stopped in late June at an Italian factory. Weaknesses identified on two areas of the fuselage barrels produced at the factory could cause significant damage if they weren't repaired, the company found.

Boeing and its Italian subcontractor, Finmeccanica SpA's Alenia Aeronautica, said the problem is relatively minor, and a fix is already under way. "This has in no way affected the Dreamliner's first flight or the plane's production time or costs," Giovanni Bertolone, Alenia Aeronautica's chief executive, said in an interview Friday.

Boeing officials say they have followed the legal and financial requirements for disclosing information about the 787 program. Lori Gunter, a Boeing spokeswoman, defended the company's decision not to announce the fuselage problem in June. "This is fairly normal for a new development program. These issues come up and we deal with them and move on," she said.

A person familiar with Boeing's operations said stoppage orders like the one that occurred at the Italian plant happen often and usually involve minor matters.

They represent "a daily, common occurrence at major companies," this person said. But the Italian situation "was not a safety issue [and] not a flight issue," making prompt disclosure unnecessary.

Boeing's stock price has been sensitive to developments in the 787 program [no kidding]. On Friday, Boeing shares fell $1.75, or 3.8%, to $44.87 in 4 p.m. composite trading on the New York Stock Exchange.

Nearly two years of delays on the Dreamliner program have put investors and customers on high alert.

A week before Boeing disclosed in June that it was again delaying flight tests and 787 deliveries, Boeing executives said at the Paris Air Show that the plane was on track to make its maiden flight by end of June.

In the weeks following, including on the company's July 22 quarterly earnings call, the company made no mention of the Alenia factory problem.‹

[rdavis8325]

Race begins next week for 12 bln-dlr India warjet deal

Boeing will be the first to take part when it displays its F-18 "Superhornet," the official said, adding that a team of US-based aviation experts would be present in the southern city for the trials.
by Staff Writers
New Delhi (AFP) Aug 7, 2009
India will next week start fighter jet trials as the world's six top aerospace giants vie for a 12-billion-dollar military contract, an official said Friday.

The trials for what will be the world's most lucrative fighter contract in more than a decade will begin in Bangalore, India's space research and aeronautical industry hub.

The assessment is due to continue for almost a year before New Delhi makes its choice from the six companies, the official said.

Boeing will be the first to take part when it displays its F-18 "Superhornet," the official said, adding that a team of US-based aviation experts would be present in the southern city for the trials.

Lockheed Martin of the US and Europe's EADS will be among the other five firms descending on Bangalore.

The official, who spoke on condition of anonymity, said the precise date for the start of trials will depend on weather conditions.

India is on a spending spree to update its largely Soviet-era weapons system and is looking at buying 126 fighter jets.

After Boeing, Lockheed Martin is next in line to showcase its F-16 to the technology-hungry Indian airforce, the official said.

The European Aeronautic Defence and Space Company (EADS) will offer its Typhoon Eurofighter, while Russia is seeking to sell the MiG-35 and MiG-29.

French Dassault, which constructs the Mirage, has put forward its Rafale aircraft as a contender.

In April, India said it would not buy the Rafale because it was too expensive. But within weeks New Delhi without elaborating said the French firm had re-joined the race.

The line-up is completed by Gripen, part of Sweden's Saab.

Industry sources have said Lockheed Martin and Boeing have emerged as front-runners.

http://www.spacewar.com/reports/Race_begins_next_week_for_12_bln-dlr_India_warjet_deal_999.html

[rdavis8325]

Boeing Receives $1.15B Contract for 15 Canadian Chinooks, Announces Matching Reinvestment in Industry

HALIFAX, Nova Scotia, Aug. 10 /PRNewswire-FirstCall/ -- The Boeing Company [NYSE: BA] today announced that it has received a US$1.15 billion contract from the Canadian government for 15 new CH-47F Chinook heavy-lift helicopters. Under the contract, Boeing will match Canada's purchase price by executing contracts and investments of equal value with Canadian industry.

Designated the CH-147 in Canada, the Chinooks have been contracted to meet Canada's Medium-to-Heavy Lift Helicopter program requirements. They will be produced at the Boeing Rotorcraft Systems facility in Ridley Township, Pa., with deliveries expected to occur between 2013 and 2014.

Speaking today at an event hosted by the ministries of Defence and Industry at the I.M.P. Aerospace facility in Halifax, Jack Dougherty, Boeing vice president, H-47 Programs, said, "Boeing is extremely pleased that Canada has selected the CH-147 Chinook, the world's leading tandem-rotor helicopter, to modernize its defense forces' airlift fleet.

"This is also great news for Canadian troops," Dougherty added. "They are a national treasure, because they not only place themselves in defense of Canada, but also are the heroes who are called on in every manner of civil emergency."

The ceremony also included remarks from the Honorable Peter MacKay, Canada's Minister of National Defence and Minister for the Atlantic Gateway.

"This contract is key in ensuring the Canadian Forces are a first-class, modern, flexible force capable of defending Canada and the Canadian interest for years to come," MacKay said. "This helicopter will give Canada's military a robust capability with the ability to operate in remote and isolated areas, and increase their capacity to respond to disasters both at home and abroad."

In line with Canada's Industrial & Regional Benefits policy, Boeing will match every dollar spent by the Canadian government in acquiring its CH-147 fleet by partnering with and issuing contracts to companies in Canada. These opportunities will result in long-term, high-value jobs for Canadians and build on the long-standing partnership between Boeing and Canadian industry. Contracts worth in excess of $500 million have been signed against this commitment and are being implemented by companies across Canada.

"This is a win-win for Canada and The Boeing Company," said Mark Kronenberg, vice president of International Business Development for Boeing Integrated Defense Systems. "Boeing seeks to partner with the very best of industry, and as a result, we continue to make a significant commitment to Canadian industry. This new contract has created opportunities for new partnerships to further grow our already large supplier base in Canada."

Along with the reinvestments Boeing will make as part of the delivery contract, the company could provide additional industry benefits in excess of $2 billion over 20 years for in-service support of the CH-147 fleet. The performance-based in-service support could include aircraft maintenance training systems and services, engineering support, supply chain management, and other expertise.

The CH-147, which will be modified to meet Canada's operational environment, will be powered by two 4,733-horsepower Honeywell engines and feature extended-range capabilities. It will be able to transport more than 21,000 pounds (9,525 kg) of cargo.

A unit of The Boeing Company, Boeing Integrated Defense Systems is one of the world's largest space and defense businesses specializing in innovative and capabilities-driven customer solutions, and the world's largest and most versatile manufacturer of military aircraft. Headquartered in St. Louis, Boeing Integrated Defense Systems is a $32 billion business with 70,000 employees worldwide.

###

Contact:

Hal Klopper
International Rotorcraft Communications
Office: 480-891-5519
Mobile: [phone]
[e-mail]

Amy Horton
Supplier Management and Industrial Participation Communications
Office: 314-233-4368
Mobile: [phone]
[e-mail]


http://www.globalsecurity.org/military/library/news/2009/08/mil-090810-boeing01.htm

[Biowatch]

>>According to a senior program source: "There is good news and bad news. The good news is we know what to fix, and how to fix it. The bad news is the location is a [expletive] to get to."<<

http://www.flightglobal.com/blogs/flightblogger/2009/07/a-month-later-boeing-continues.html
July 21, 2009

[DewDiligence]

Honeywell 2Q09 Profit Meets Estimates; Trims 2009 Guidance

http://finance.yahoo.com/news/Honeywell-profit-meets-rb-2642742535.html?x=0&.v=2

›Monday July 27, 2009, 7:43 am EDT

BOSTON (Reuters) - Diversified U.S. manufacturer Honeywell International Inc (NYSE: HON) reported a 38 percent drop in earnings that matched Wall Street's forecasts and cut its full-year profit forecast to the bottom of its prior range.

The world's largest maker of cockpit electronics, which is facing a coordinated downturn in its core aviation and construction markets, said on Monday it expects no economic recovery this year.

Honeywell now looks for full-year earnings of $2.85 per share, at the low end of its prior forecast of $2.85 to $3.20. It cut its revenue forecast to $31.5 billion, below its prior range of $32.3 billion to $33.2 billion.

"Economic conditions ... remain challenging and we are not planning for any recovery in 2009," said Chairman and Chief Executive Dave Cote, in a statement.

Honeywell, which also makes systems to manage the temperature and security of large buildings, said second-quarter income came to $450 million, or 60 cents per diluted share, compared with $723 million, or 96 cents per diluted share, a year earlier.

Revenue at the Morris Township, New Jersey-based company fell 22 percent to $7.57 billion. Analysts, on average, had looked for earnings of 60 cents per share on revenue of $7.68 billion, according to Reuters Estimates.

For the year, Wall Street had looked for profit of $2.83 per share.

So far this year, Honeywell shares are up 3.5 percent, while the Standard & Poor's capital goods industry group (^GSPIC - News) is down 3.4 percent.

Its competitors include United Technologies Corp (NYSE: UTX) in aerospace and building control systems, Goodrich Corp (NYSE: GR) in aviation and DuPont Co (NYSE: DD) in specialty materials.‹

[DewDiligence]

Boeing Has Dreamliner Fix, But Don’t Hold Your Breath

http://www.businessweek.com/bwdaily/dnflash/content/jul2009/db20090722_767860.htm

›July 22, 2009, 1:20PM EST
By Joseph Weber

Executives of Boeing (BA) say they know how to fix the structural problem that sidelined the much delayed 787 Dreamliner's planned first flight last month. But they decline for now to say when they'll put the plane in the air. And engineers are telling The Seattle Times the costly fix may put off the maiden voyage until next year.

Boeing executives, in a note released before they discussed their July 22 earnings release with analysts, suggested they had figured out how to solve the problem that afflicts the high-tech composite used in the wings on the jet. They are reviewing alternatives on how best to put the fix in place and don't expect to update Boeing watchers on the plane's prospects for a few months yet.

Engineers said to be knowledgeable about the problem told the Seattle newspaper that the solution will take at least three months to install on a nonflying test plane in the company's factory in Everett, Wash. Then it will take another month or two to put it into a plane scheduled to fly. The engineers told the paper that the installation will be difficult on planes that have already been built—a claim that conflicts with the "simple modification" Boeing executives suggested would be needed back in June. [Someone’s lying!]

The newspaper reported that the problems that have shown up in the tests so far involve a "delamination" of the plastic composite used in the wing that takes place when the plane is put under high stress. The potential fix involves making a U-shaped cutout in the material and adding titanium fasteners. If the fix doesn't work, delays in the plane could push a first flight further into 2010, the paper reports.

‘New Schedule by September?

Boeing CEO W. James McNerney Jr. said in his July 22 discussion with analysts that the Dreamliner team has identified a technical solution that is "straightforward" and involves a small number of parts that would be installed to reinforce the trouble spot. The team is now trying to figure out the best way to implement the fix and is proceeding with "an abundance of caution." "Much to our disappointment, the 787 continues to challenge us." McNerney said. Boeing "will not sacrifice quality for expediency."

McNerney said officials likely would share a final plan for the first flight later this quarter, suggesting a schedule of some sort may be released by the end of September. "We are learning from our lessons on this program," he added, apparently alluding to outsourcing issues that have snarled the jet's development. Boeing will not balk at "redrawing some lines that were established when we first started."

For the quarter ended June 30, Boeing reported earnings of $998 million, up 17% from $852 million during the same period last year. Revenue rose only 1%, to $17.15 billion. Commercial plane revenues slid 2%, to $8.4 billion, while defense revenues rose 9%, to $8.7 billion.‹

[chunga1]

BVR to sell assets to Elbit Systems for $34M
Associated Press, 07.20.09, 03:35 PM EDT



ROSH HA'AYIN, Israel -- Military training and simulation systems company BVR Systems Ltd. said Monday it has agreed to sell its assets to Israeli defense contractor Elbit Systems Ltd. for $34 million, subject to adjustments.

BVR said the purchase price could be adjusted if payments for any of its projects are not up to date. The amount will be reduced by a further $1.5 million, which will be held in escrow for 120 days while Elbit conducts a review. Elbit will be entitled to receive up to that amount for project payments found not to have been made.

BVR has also pledged a cash deposit of $1.5 million to guarantee its indemnification obligations.

The deal includes the re-employment of BVR's employees by Elbit.

"We have chosen to combine our resources with Elbit since we recognize the synergies and I am very confident that this is the right choice for BVR," Aviv Tzidon, chairman of BVR's board, said in a statement.

In a separate statement, Elbit's president and CEO, Joseph Ackerman, said the acquisition is "in line with our long-term strategy of growth through mergers and acquisitions of complementary companies with high synergistic value."

http://www.forbes.com/feeds/ap/2009/07/20/ap6676057.html

[DewDiligence]

The 58-40 vote reflected an all-out lobbying campaign by the administration, which had to overcome resistance from lawmakers confronted with the potential losses of defense-related jobs if the F-22 program was terminated.

It’s unusual these days to see a bill pass in the Senate with less than the 60 votes needed to avert a filibuster.

[crable]

Senate sides with Obama, removes F-22 money
By JIM ABRAMS, Associated Press Writer Jim Abrams, Associated Press Writer
50 mins ago

WASHINGTON – The Senate voted Tuesday to halt production of the Air Force's missile-eluding F-22 Raptor fighter jets in a high-stakes showdown over President Barack Obama's efforts to shift defense spending to a new generation of smaller F-35 Joint Strike Fighters.

The 58-40 vote reflected an all-out lobbying campaign by the administration, which had to overcome resistance from lawmakers confronted with the potential losses of defense-related jobs if the F-22 program was terminated.

"The president really needed to win this vote," Senate Armed Services Committee Chairman Carl Levin, D-Mich., said. Levin said it was important not only on the merits of the planes but "in terms of changing the way we do business in Washington."

The top Republican on the committee, John McCain of Arizona, agreed that it was "a signal that we are not going to continue to build weapons systems with cost overruns which outlive their requirements for defending this nation."

Supporters of the program cited both the importance of the F-22 to U.S. security interests — pointing out that China and Russia are developing planes that can compete with it — and a need to protect aerospace jobs in a bad economy.

Defense Secretary Robert Gates and other Pentagon officials have determined that production of the F-22, which has not been used in Iraq and Afghanistan, should be stopped at 187 planes in order to focus on the F-35, which would also be available to the Navy and Marine Corps.

Sen. Orrin Hatch, R-Utah, countered that the F-35 is designed to supplement, not replace, the F-22, "the "NASCAR racer of this air dominance team." Supporters of the F-22 have put the number needed at anywhere from 250 to 380.

The defense bill has funds to build 30 F-35s. The plane is currently being produced in small numbers for testing purposes. The single-engine plane will eventually replace the venerable F-16 and the Air Force's aging fleet of A-10s. Its primary purpose is to attack targets on the ground.

The twin-engine F-22 Raptor is a jet the Air Force would use for air-to-air combat missions.

McCain said the voting margin of victory was "directly attributable" to Obama, his opponent in the last presidential election, and Gates, who has pushed for termination of the F-22 and other weapons systems he says have outlived their usefulness.

The vote removed $1.75 billion set aside in a $680 billion defense policy bill to build seven more F-22 Raptors, adding to the 187 stealth technology fighters already built or being built.

The Senate action also saved Obama from what could have been a political embarrassment. He had urged the Senate to strip out the money and threatened what would have been the first veto of his presidency if the F-22 money remained.

Immediately after the vote, Obama told reporters at the White House the Senate's decision would "better protect our troops."

White House officials said Vice President Joe Biden and chief of staff Rahm Emanuel lobbied senators, as did Gates.

Pentagon spokesman Geoff Morrell said Tuesday that spending on the stealth fighter would "inhibit our ability to buy things we do need," including Gates' proposal to add 22,000 soldiers to the Army.

"I've never seen the White House lobby like they've lobbied on this issue," said Republican Sen. Saxby Chambliss of Georgia, an F-22 supporter whose state would be hit hard by a production shutdown.

According to Lockheed Martin Corp., the main contractor for both planes, 25,000 people are directly employed in building the F-22, and an additional 70,000 have indirect links, particularly in Georgia, Texas and California.

Sen. Christopher Dodd, D-Conn., a strong backer of the program, said his state stood to lose 2,000 to 4,000 jobs if F-22 production ended.

Levin suggested that some workers might be shifted to F-35 production. "We have to find places for people who are losing their jobs," he said.

The House last month approved its version of the defense bill with a $369 million down payment for 12 additional F-22 fighters. The House Appropriations Committee last week endorsed that spending in drawing up its Pentagon budget for next year. It also approved $534 million for an alternate engine for the F-35 Joint Strike Fighter, another program that Obama, backed by the Pentagon, says is unwarranted and would subject the entire bill to a veto.

The defense bill authorizes $550 billion for defense programs and $130 billion for military operations in Iraq and Afghanistan and for other anti-terrorist operations.

___

The defense bill is S. 1390.

___

On the Net:

Congress: http://thomas.loc.gov

[DewDiligence]

Offsets Prove a Complex and Dangerous Mix

[This is a sidebar to the article in the previous post.]

›In essence offsets are simple: legal requirements which make defence contractors help local industries by spending a percentage of any contract value in the purchasing country.

But the combination of compulsion, opaque contracting and developing economies has often proved complex and dangerous.

In 2004, Thailand proposed, unsuccessfully, that bidders wanting an order for fighter jets buy frozen chickens in return. [Unfreakingbelievable!]

In the late 1980s, several Northrop Grumman executives were forced to resign as a result of a botched offset investment made during attempts to sell fighter jets to South Korea.

Formal offset arrangements have grown markedly since they developed after the second world war. Between 1993 and 2007, American defence companies reported transactions in 48 countries with a value of $45.7bn.

However, innovation is making offsets more mainstream, according to Grant Rogan, who runs Blenheim Capital, a joint venture with Barclays Capital set up in 2006 that has arranged about $6bn worth of offsets, mainly in the Middle East.

Intermediaries such as Blenheim have introduced new financial tools to the process, leveraging-up offset investments to bring in added scrutiny from banks.

As defence companies look to foreign markets, demand is increasing. Blenheim is hiring, as well as applying for accreditation from UK financial regulators to try to remove some of the stigma associated with offsets.‹

[DewDiligence]

Multinational Defense Companies Eye New Targets

http://www.ft.com/cms/s/0/51e4164e-756a-11de-9ed5-00144feabdc0.html

›By Jeremy Lemer
July 20 2009 22:23

This month, Honeywell, the industrial conglomerate, reorganised the sales and marketing operation of its defence and space business to align it more closely with its customer base.

The centrepiece of the restructuring is a new Swiss-based international division, whose first challenge is to go after business in India, where the company is pitching for a $4.5bn contract to upgrade the engines of 125 Jaguar ground attack aircraft.

Garrett Mikita, the new head of the defence unit which had turnover last year of $5.3bn, says the shake-up is aimed at doubling annual revenue growth to around 7 per cent over the next five years.

“We want to make sure we stay relevant,” Mr Mikita says. “Global change is happening in the defence industry.”

Honeywell is one of a number of US defence contractors eyeing international markets with renewed interest – lured by increased spending by countries such as India and Brazil, just as Pentagon spending starts to flatten out and some larger programmes are cut.

“With two wars underway since 2001 and a booming domestic market, prime contractors could focus on the US,” says Marko Lukovic, head of the aerospace and defence practice at Frost & Sullivan, the consultancy. “Now, the US market isn’t what it once was and they have to look elsewhere.”

Jim Albaugh, head of Boeing’s defence business, says there is nothing to stop exports of its aircraft and services reaching 20 per cent of total revenues, up from about 16 per cent. “Lots of countries have the resources and the threat environment and need the equipment we provide.”

Raytheon, the defence electronics contractor, is more ambitious. Foreign sales are already the highest in the sector at 20 per cent of revenue, or $4.6bn, and David Wajsgras, chief financial officer, says it is on course to hit 25 per cent.

The move towards exports is under way. According to the Pentagon, US government-to-government sales have jumped from a range of $8bn to $13bn in the early part of the decade to about $27bn in the first half of this year alone.

A key target is India. The country’s defence budget will exceed that of the UK for the first time this year, placing it among the top three global spenders, according to Frost & Sullivan. In the next 10 years it will spend $100bn on equipment – including $10bn on 126 fighter jets.

For companies such as Boeing overseas markets are crucial because Pentagon orders are drying up. Sales in India and Australia and elsewhere could provide lifelines for Boeing’s F/A-18 and F-15 fighters and its C-17 transport aircraft. For all the enthusiasm, experts say the obstacles are significant. Securing export approvals from Congress and the US State Department, can be time consuming and frustrating.

Technology transfer is another potential sticking point. Even the Lockheed Martin F-35, which is designed for export, has had its moments. In 2006, the UK, the main international partner on the programme, threatened to walk away after a spat over access to computer-software codes.

Such issues are often wrapped in wider inward investment deals. Most governments require “offsets” where suppliers are compelled to reinvest a percentage of the contract value in local businesses. [See sidebar in next post.]

Industry analysts point out that foreign governments are also feeling the pinch.

“The problem is: what about the downturn?” says Rob Stallard with Macquarie Research. “Countries with grandiose plans 12 months ago are not so quick to pick up their cheque book now.”‹

[DewDiligence]

Northrop Gains From Pentagon's Shifts

http://online.wsj.com/article/SB124770227436448533.html

›JULY 16, 2009
By AUGUST COLE

Northrop Grumman Corp. expects to keep gaining from shifts in U.S. national-security priorities that are helping the company challenge Boeing Corp. as the nation's No. 2 defense contractor.

Northrop has staked out a sweet spot in which its warships, highly classified cyberwarfare technologies and the Global Hawk unmanned spy plane will play frontline roles in years to come as Defense Secretary Robert Gates upends Pentagon spending, company executives say.

"I think Northrop came out pretty well," Chairman and Chief Executive Ronald Sugar says. "We've spent the last five or 10 years positioning the company for this eventuality."

How Mr. Sugar and his rivals at Boeing and Lockheed Martin Corp. view the shake-up will become more clear in coming weeks as they discuss their outlooks after reporting earnings.

Already, though, it is clear that this is shaping up to be a big year for Mr. Sugar, who became chief executive in 2003. Boeing expects its defense business to post between $33 billion and $34 billion in sales this year, while analysts expect Northrop to bring in almost $35 billion in total revenue. Northrop reported first-quarter profit of $389 million, up 47% from a year earlier, when the company took a hefty charge.

While not a direct comparison because the companies structure their operations differently, bragging rights are important to Northrop. Mr. Sugar occasionally refers to Northrop as "the Rodney Dangerfield" of defense contractors, in part because its focus on information systems and electronics give Northrop a lower profile than Boeing enjoys thanks to that company's warplanes.

Northrop also is battling to keep a $40 billion Air Force aerial-refueling contract it won last year. After Boeing successfully protested the award to the Government Accountability Office, the Pentagon planned a new competition for later this year.

Mr. Gates wants the administration's $533.8 billion Pentagon budget for fiscal 2010, which still is being hammered out in Congress, to rebalance the military so it is better able to defeat foes like the insurgents found in Iraq and Afghanistan. He envisions buying no more costly planes like Lockheed's $143 million F-22 Raptor jet fighter but would continue to purchase items like Northrop's Global Hawk spy plane, which provides battlefield information for troops for less than half as much.

Mr. Sugar, an engineer by training who joined Northrop when it acquired Litton Industries Inc. in 2001, says the national-security budget will have to keep pace with increasingly dangerous threats, from cyberattacks to North Korean missiles. "There's this vague perception that defense has peaked... So far we don't really see that," he says.

A decade ago, major defense contractors were buying and selling operations to ride out the post-Cold War downturn in spending. But Northrop repositioned itself "from being a military-airplane company to being a company focused more on electronics, information and intelligence," Mr. Sugar says. One of his key deals was Northrop's $580 million purchase in 2006 of Essex Corp., a cybersecurity and intelligence specialist.

In the near term, Northrop is likely to benefit as the Pentagon accelerates spending on the military's biggest contract, the roughly $300 billion F-35 Lightning II. Northrop is a major subcontractor on the jet fighter, providing components such as radar and the center fuselage, to the Lockheed-led project.

Northrop also will take the lead in restarting production of the Navy's DDG-51 destroyer, which could bring in billions of dollars in steady work.

Northrop has taken hits, the heaviest being the cancellation of a missile-defense program that could have brought in billions of dollars over several years. But "it did not punch a hole in our revenue," Northrop President Wes Bush says.

And while shipbuilding has been a cornerstone, the business has been one of Mr. Sugar's biggest tests. Construction of a Navy amphibious assault ship called the Makin Island cost the company hundreds of millions of dollars when wiring and other work had to be redone.

Boeing, meanwhile, has been pressured by the recent dismantling of the $200 billion Army Future Combat Systems modernization program, as well as by continued Pentagon opposition to buying more C-17 Globemaster III transport planes, though Congress so far has reinstated the C-17.‹

[chunga1]

U.K. in market for new armored vehicles
Published: July 13, 2009 at 9:45 AM


BAE Systems and General Dynamics are being asked to participate in a program that will result in a new series of armored reconnaissance vehicles for the British military.

British Ministry of Defense officials last week announced they planned soon to send BAE Systems Global Combat Systems and General Dynamics U.K. invitations to tender for the vehicle project.

"This follows the announcement of the strategy for the procurement of armored vehicles which I made on 23 June," Minister for Defense Equipment and Support Quentin Davies said in ministry release. "These vehicles will play a major role in current operations and in equipping the army to stand ready to respond to a wide range of contingencies in the future.

"(This) announcement shows that the government puts the provision of the best vehicles that money can buy at the heart of its priorities."

Last month Davies said the Ministry of Defense planned to "make greater use of the global market, particularly within the EU and NATO," and look outside its traditional markets for military vehicles if design information can also be acquired to allow for modifications in the future.

The program announced last Thursday is being referred to as the Future Rapid Effect System Specialist Vehicle. It includes three groups of vehicles: Reconnaissance, Medium Armor and Maneuver Support. The new series is meant to replace Scimitar and Spartan vehicles, which are being used by U.K. forces in Afghanistan.

The Scimitars are light tanks that have been in use since 1973. The Spartans are small armored personnel carriers designed to carry four soldiers. Both series of vehicles have a crew of three. They are made by Alvis.

The new series of armored vehicles looks to develop a medium-weight armored fleet "with higher levels of deployability and protection than in-service vehicles, and with the potential to accommodate changes in technology," the Ministry of Defense release said.

The vehicles have increased capabilities when compared with the Scimitar.

"These vehicles will play a major role in current operations and in equipping the Army to stand ready to respond to a wide range of contingencies in the future," Davies said.

General Dynamics in late June staged demonstrations for ministry and military officials at the DVD 2009 military equipment show at Millbrook Vehicle Proving Ground.

Ahead of the appearance, General Dynamics promised to "demonstrate its capabilities as a leading systems integrator of armored fighting vehicles, security and resilience technology, and solutions enabling command and control through information dominance" at DVD 2009.

A U.S. section of BAE was recently awarded a $124.8 million series of contracts to upgrade and maintain U.S. Army M113 armored personnel carriers.

http://www.upi.com/Security_Industry/2009/07/13/UK-in-market-for-new-armored-vehicles/UPI-82991247492751/

[DewDiligence]

I think Gates will keep the buy limited. Congress just needs to put up some kind of fight to keep the constituents happy.

You could be right—if Gates loses on this one, he loses a lot of credibility for future negotiations.

[crable]

I think Gates will keep the buy limited. Congress just needs to put up some kind of fight to keep the contituents happy.

[DewDiligence]

Thanks, Biowatch. Does anyone else care to chime in on #msg-39386659? T.i.a. Dew

[DewDiligence]

Congress Backs F-22 Fighter the Pentagon Doesn’t Want

[This program affects several publicly-traded companies including LMT, BA, and GE.]

http://www.boston.com/news/nation/washington/articles/2009/07/12/democrats_obama_disagree_on_f_22_spending

›By Bryan Bender
July 12, 2009

WASHINGTON - From the economic recovery plan to healthcare reform and creating clean-energy jobs, Representative Paul Hodes has been among President Obama’s staunchest supporters in Congress.

But when it comes to the administration’s proposal to end production of the F-22 Raptor fighter jet to save billions of dollars over the next decade, the New Hampshire Democrat is drawing the line: Hodes has joined others members of the president’s own party to insist the Air Force buy more of the planes despite fierce objections from the Pentagon and even the threat of a presidential veto.

Hodes’s view on the F-22, shared by other usually stalwart Obama supporters such as Senators Edward M. Kennedy and John F. Kerry, signifies the extent to which one of the president’s priorities - paring down costly weapons systems - is at risk of flaming out on Capitol Hill, where lawmakers in both parties are scrambling to protect jobs back home.

Hodes’s district includes Nashua, where an estimated 1,400 workers at BAE Systems help build the jet’s electronic combat systems - one of many facilities in 44 states where jet components are manufactured.

“Thousands of jobs are dependent on it,’’ said Mark Bergman, Hodes’s spokesman, explaining his boss’s position.

The ultimate fate of the F-22, however, has wider implications for defense spending, according to military specialists and congressional specialists. If the plane continues to be produced, they predict, other weapon systems that Secretary of Defense Robert M. Gates has recommended cutting back could be revived as lawmakers are emboldened to push for their own pet projects.

“If Gates and Obama can’t sustain the veto, the defense budget is a ham sandwich and will be carved up,’’ said Winslow Wheeler, a former GOP defense aide who is now a senior fellow at the Center for Defense Information in Washington. “We are talking about a political system that watches these things very closely. Any perceived weakness only begets more weakness.’’

Obama still has some influential lawmakers in his corner, including Senator John McCain, the top Republican on the Senate Armed Services Committee. When the full Senate takes up the defense bill this week, McCain plans to lead an effort to reverse the decision in committee that would add $1.7 billion for 12 additional F-22s next year.

“I strongly support Secretary Gates’s position that procurement of additional F-22s beyond 187 aircraft is unnecessary and should not be done,’’ McCain told the Globe in a statement.

One defense analyst estimates that $65 billion has been spent on the F-22 program to date; the price tag for each of the stealth fighters, designed during the Cold War for the next generation of air-to-air combat, is about $200 million.

The House of Representatives, meanwhile, has already voted in favor of adding nearly $400 million to purchase parts for at least seven additional F-22s. The two chambers will have to ultimately come up with a common bill.

The proposal not to build the final batch of 60 F-22s is at the center of Gates’s effort to scale back some costly weapon systems and free up resources for new capabilities such as intelligence-gathering tools to confront less conventional enemies, such as those in Iraq or Afghanistan.

When he rolled out his budget plan in April, Gates urged members of Congress to resist the temptation to fight for some of these programs solely on the grounds that they employ their constituents [LOL].

He called on lawmakers “to critically and ruthlessly separate appetites from real requirements’’ - a reference to the longtime practice by lawmakers of funding pet projects whether they are justified or not.

On Gates’s advice, the White House appears poised to fight for its position on the F-22. In a tersely worded memo to House lawmakers on June 24, the White House said that “if the final bill presented to the president contains this provision, the president’s senior advisers would recommend a veto.’’

The president’s party holds significant majorities in both chambers, but party loyalty only goes so far when it comes to defense contracts.

It is unclear whether Obama can garner enough votes to make a veto stand, according to a number of close observers. If a two-thirds’ majority in both chambers backs the F-22, he will be forced to buy them.

The signs aren’t good. So far, the House leadership has refused to even consider three proposed amendments to remove the F-22 funding from the defense bill.

And Kennedy, perhaps the president’s biggest ally on Capitol Hill, has been a longtime advocate of the fighter plane. Late last month he used his vote on the Senate Armed Services Committee to support the F-22 funding. He also voted to finance other projects that have an economic impact in the Bay State but that the Pentagon says it doesn’t need.

He hopes that someday the Massachusetts Air National Guard will be able to replace their F-15 jets with the F-22, his office said in a statement.

But in a letter in support of continuing the program sent to then-President-elect Obama in January, Kennedy and dozens of other senators cited the economic impact of terminating the program, including more than 1,000 suppliers nationwide and at least 25,000 jobs. The project’s prime contractor is Lockheed Martin.

Meanwhile, Kerry, who also signed the January letter, this week reiterated his support for building more of the multibillion-dollar fighter jets even amid new reports that the aircraft may be experiencing technical problems.

The Washington Post reported on Friday that the stealth coating designed to allow the plane to evade enemy radar has failed to perform in recent tests and the jet has suffered from a variety of maintenance problems.

“I can confirm that the senator’s position [in favor of more F-22s] has not changed,’’ said Kerry’s spokeswoman, Jodi Seth.

Obama is facing opposition from Democrats across the region. Representative Carol Shea-Porter, from New Hampshire, also supports building more F-22s, according to her spokeswoman, Jamie Radice, as does Senator Chris Dodd of Connecticut.

For his part, Kennedy’s break with the president’s defense spending priorities goes beyond just the F-22.

He voted in favor of buying nine more F/A-18 Super Hornet fighter jets for the Navy than the administration requested and providing more than $600 million that the Air Force didn’t ask for to build an alternative engine for the F-35 Joint Strike Fighter - another provision that the White House warns could prompt a veto.

Engines for both the F/A-18 and the F-35 are built by General Electric’s aviation division in Lynn. In total, the Super Hornet program supports 102 companies across Massachusetts and employs more than 3,800 people, according to a briefing prepared for congressional staff by Boeing, the main contractor.

But many watchdog groups fear that such reversals in Gates’s budget plan - especially on the F-22 - will jeopardize the integrity of the entire Pentagon reform plan in the years to come, including the recommendations of a defense strategy review to be completed by the end of the year.

“Procurement of additional F-22s does not serve our national security needs and jeopardizes the Department of Defense’s higher priorities,’’ said Danielle Brian, executive director of the Project on Government Oversight.

At least one supporter of buying more F-22s agrees. Loren Thompson, president of the Lexington Institute, a think tank that espouses a stronger defense, said he believes that other programs are more likely to be revived by Congress if the administration loses the F-22 battle.

“Obama either has to veto the whole bill or accept a significant legislative defeat,’’ he said. “He raised the symbolic value; if he loses, he loses big.’’

Some lawmakers have shown a willingness to accept the Pentagon’s arguments despite the possible political repercussions.

Representative Chellie Pingree, Democrat of Maine, represents North Berwick, where Pratt & Whitney builds the F-22’s engines. Even so, she voted no on adding funding for the plane in the House Armed Services Committee last month.

Pingree, says her spokesman, Willy Ritch, “is confident that the men and women at the Pratt & Whitney facility in Maine will continue working on other contracts.’’‹

[Biowatch]

747-8F could fly before 787 ?

http://www.fleetbuzzeditorial.com/2009/07/10/747-787/

Only so many hands available to build wide body jets.

[crable]

Inside the Pentagon - 7/9/2009
Key guidance expected this month
DOD POLICY SHOP’S BUDGET INFLUENCE CUT IN MAJOR QDR DEBATE
Debate within the Office of the Secretary of Defense has led those spearheading the Quadrennial Defense Review to delete a myriad of programmatic recommendations from strategic guidance written to rebalance military priorities, sources tell Inside the Pentagon.
The Defense Department’s program analysis and evaluation office, the comptroller’s office and the Joint Staff rolled back the Pentagon policy shop’s attempt to dictate everything from helicopter procurement plans to the number of intelligence, surveillance and reconnaissance orbits needed to support military operations, a Pentagon official said.
There was agreement on the general strategic direction of the guidance written by the policy shop, but officials balked at programmatic recommendations because they worried the specifics were wrong, might amount to unaffordable bills for the department or were too detailed to be decided “in a vacuum,” the official said.
When the debate was over there was “blood on the floor” and the vast majority of the programmatic recommendations were cut from the document, known as the Guidance for the Development of the Force, the official said, adding that Defense Secretary Robert Gates has since released a draft of the GDF to four-star officers for comment. Gates is likely to issue a final version to defense officials this month, sources said, as InsideDefense.com has reported.
None of the strategic guidance changed, the official said, noting the outcome was good, but it was “way too hard” to get there. A military official said the GDF is now “a lot less specific” compared to early drafts. In addition to the program analysis and evaluation office and the Joint Staff, the services also resisted the specificity, the military official said.
“If you’re trying to rebalance the force, you may make some specific recommendations on what programs to enhance or what new ones to pursue, whereas if you’re the service you say ‘No, you just told me you just want the irregular warfare capability improved and let me figure out how to do that,’” a second Pentagon official said.
But the debate over the guidance was mainly confined to OSD, according to the first Pentagon official. The discussion came months after DOD policy chief Michèle Flournoy, in written testimony prepared for her confirmation hearing in January, advocated boosting her office’s role in the planning, programming and budget process.
The policy shop’s chief advocate for the programmatic recommendations was Kathleen Hicks, the deputy under secretary of defense for strategy, plans and forces and the head of QDR efforts, the first Pentagon official said.
The essence of the debate was about the degree to which OSD’s QDR shop should tell the services to fund specific initiatives or instead simply outline broad goals with negotiable suggestions about how to implement them, the second Pentagon official said.
The military official put it another way, noting the debate was about whether the GDF should be a planning or programming document. The official argued it should not be the latter, but rather a “strategic document.” Confirming that such arguments prevailed, the official said the latest version is “about right.”
A third Pentagon official said the GDF would be “pretty specific,” in some cases calling for “X number increase” in particular platforms, typically in areas where a lot of agreement already exists, or where there is sufficient analyses to back it up. But the first Pentagon official said the majority of the specific recommendations for programs had been eliminated. “There’s not a whole lot of specifics left in the current version,” the official said. “There’s a little bit.”
In the fall, DOD officials who handle programming for the planning, programming and budget process will sort through options to solve the strategic needs outlined in the GDF, the official said.
“Why should the guidance say you have to buy stuff if there’s a better way to do it?” the official said, noting that a need for more helicopters in Afghanistan, for example, does not necessarily mean the Pentagon must buy new airframes.
Citing another example, the official said the GDF calls for DOD to be ready to give equipment to other countries for internal security rather than going through the lengthy foreign military sales process. This was seen as a good idea, but the GDF initially was written in a way that required DOD to buy, warehouse and maintain the gear. DOD’s acquisition directorate objected, noting DOD can get contractors to rapidly deliver some gear and only certain long-lead items need to be warehoused, the official said. The acquisition office won that argument, so now the guidance simply calls for providing the gear on short notice, the official added.
The wrangling over the guidance comes at a critical time for officials conducting the QDR, which is expected to help the Pentagon steer investment decisions for fiscal year 2011 and beyond.
David Ochmanek, deputy assistant secretary of defense for force development and the head of the QDR analysis and integration cell, said in May that officials were mulling defense planning scenarios to identify capability gaps and capacity shortfalls, while also gathering ideas about programs and development projects that might provide solutions (ITP, May 28, p1). He noted that work would culminate in June, when his office would harvest “1,000 flowers” and turn them into “perfume.” On June 26, InsideDefense.com reported OSD’s guidance would contain the first round of QDR “insights.”
In the months ahead, the Pentagon must reconcile a disconnect between the QDR effort and the services’ FY-11 budget work, two processes that have been running in parallel, the military official said.
The services are due to turn in FY-11 budget plans to the service secretariats this month, the official said. Once the GDF is issued, service leaders will be tasked with complying with the guidance. In some cases the services might respond by taking new steps, but they might also highlight existing efforts to make the case that current initiatives meet the identified needs. As DOD leaders have publicly predicted, they will have to make tough choices about how best to spend limited resources, which could spark debates between the services and OSD.
“Every option looks good,” the military official said, until it is time to decide “what you’re not going to do.”
On June 17, InsideDefense.com reported that as part of the QDR process, DOD evaluated three options for shifting resources to rebalance its force. The “modest” option would shift about $30 billion over the future years defense plan, while the “extensive” one would shift $75 billion, another DOD source said.
The first Pentagon official said the $30 billion option included most of the irregular warfare capabilities eyed. The $50 billion option for “significant” changes included the first option, plus more stuff focused on combating high-end threats. The $75 billion option added even more to address high-end threats.
Sources said the intent was never to simply pick one of the options but rather to provide a menu of ideas. Most of the $30 billion option is likely to go forward and DOD will cherry-pick initiatives from the other two options, the official predicted.
With the deletion of specifics from the GDF, the cost of all the options will come down because there will likely be better ways to accomplish the goals, the official said.
Defense Secretary Robert Gates, Chairman of the Joint Chiefs of Staff Adm. Michael Mullen, the combatant commanders and other top defense officials held a meeting June 18 and 19 at the Pentagon to discuss the QDR and other major issues. The two-day Defense Senior Leadership Conference (DSLC) was an opportunity for senior military and civilian leaders to get an update on the status of QDR scenarios from the policy shop and hear from the secretary’s Red Team about their work so far. Those presentations were expected to spark a healthy debate about the analysis under way and inform the process going forward (ITP, June 18, p3).
“The conference was what the secretary had hoped it would be,” Gates’ spokesman, Geoff Morrell, told ITP. “The scenarios presented were compelling and provoked lively discussions about how best to match resources to current and emerging threats.”
More senior-level powwows are expected. “Secretary Gates plans to convene several additional senior leadership meetings before the QDR comes to a conclusion later this year,” Morrell added.
Adm. Timothy Keating, the head of U.S. Pacific Command, touted last month’s DSLC when asked about it June 29. He told ITP the DSLC was better than previous ones he has attended. But, he said, DOD had not yet issued guidance to implement what was discussed at the conference. Officials are “still making the sausage,” he said as he left the Atlantic Council’s downtown Washington office after making a speech.
During a question-and-answer session following the speech, Keating praised this year’s QDR for addressing the needs of combatant commanders. “We were just in town two weeks ago talking about this,” he said, noting combatant commanders “have a larger say so” in this year’s review compared to previous QDRs.
“We submit an integrated priority list,” with 10 issues that need more funding and attention from DOD, he said. “Of our 10,” all are being addressed in the QDR, Keating added. He said the specifics are classified, but suggested the needs include intelligence, surveillance and reconnaissance capabilities. -- Christopher J. Castelli

[crable]

Thursday, July 09, 2009
DefenseAlert - Daily News
Krepinevich: Cut Investments in JSF, EFV and Other 'Wasting Assets'
July 8, 2009 -- The Joint Strike Fighter program is one of a number of U.S. military platforms at risk of becoming a "wasting asset" -- obsolete in future conflicts, according to an influential Pentagon adviser who believes such programs should immediately be cut to increase investments in long-range unmanned strike aircraft, laser weapons and micro- and nanosatellites.
Andrew Krepinevich, the president of the Center for Strategic and Budgetary Assessments, was recently recruited by Defense Secretary Robert Gates to serve on the Defense Policy Board. In an essay published in the July/August issue of Foreign Affairs, he argues that the “military foundations of the United States' global dominance are eroding.”
The U.S. military's ability to project forces around the world and operate at will in international seas, air space, outer space and cyberspace will increasingly be challenged by the proliferation of precision weapons, Krepinevich argues, a shift that raises questions about the wisdom of major planned investments.
“The military plans to spend hundreds of billions of dollars on several thousand short-range strike aircraft that must operate from forward land bases or [aircraft] carriers, both of which are increasingly vulnerable,” he argues, though he does not explicitly name the F-35 Joint Strike Fighter, a $300 billion program to buy 2,456 fighters for the Air Force, Marine Corps, and Navy.
“These programs should be scaled back in favor of greater investment in longer-range systems, such as a next-generation bomber and the Navy's long-range unmanned strike system,” Krepinevich argues.
The Marine Corps' Expeditionary Fighting Vehicle, a $15.8 billion effort to field 593 amphibious combat vehicles, will be forced by the proliferation of cruise and ballistic missiles to deploy from ships much further from shore than originally envisioned, he says. And, once on shore, the EFV will be vulnerable to roadside bombs, he argues.
“The system should be canceled,” Krepinevich writes of the EFV. “It simply makes no sense to spend so many defense dollars on new systems that are essentially wasting assets before they even reach the field.”
The Pentagon's fiscal year 2010 budget request, which included changes to more than 50 weapon system modernization accounts -- including terminations and program restructurings -- took “initial positive steps” toward “reducing the military's emphasis on capabilities whose value will likely diminish greatly in the future,” he argues.
Krepinevich's essay comes as Gates is overseeing a sweeping assessment of the U.S. military -- the Quadrennial Defense Review -- through which he and other Pentagon leaders will decide how to adjust the blueprint for Pentagon investments and organizations to rebalance U.S. military forces to deal with a wider array of national security challenges.
Krepinevich's writings have already influenced the QDR.
Gates, through a spokesman, credited Krepinevich's book “7 Deadly Scenarios” -- a volume published in January that describes a series of challenges against which U.S. forces have limited tools -- as the catalyst behind the establishment of a QDR “Red Team” to prepare an alternative assessment and ensure the Pentagon does not fall victim to “bureaucratic group think” (DefenseAlert, May 13).
Krepinevich's observation that the military will have difficulty dominating the global commons tracks with a theme that senior Pentagon leaders say the QDR must address.
Pentagon policy chief Michèle Flournoy, in an essay published this month in the U.S. Naval Institute's Proceedings magazine, argues that the QDR must prepare for a world in which U.S. forces will increasingly be challenged by adversaries in international waters, airspace, outer space and cyberspace (DefenseAlert, July 2).
Krepinevich notes that no military in history “has ever enjoyed a perpetual monopoly on any capability.”
“To a significant extent, the U.S. military's wasting assets are the direct consequence of the unavoidable loss of its near-monopoly on guided weapons,” he writes in Foreign Affairs. “This monopoly simply cannot be regained.”
Given this reality, there is “a compelling need to develop new ways of creating military advantage in the face of contemporary geopolitical and technology trends,” Krepinevich states. “That means taking a hard look at military spending and planning and investing in certain areas of potential advantage while divesting from other assets.”
He cites modernization programs in China and Iran that are designed to offset U.S. naval capabilities, as well as the 2006 war between Lebanon and Israel, where irregular forces employed high-tech weapons to great effect against Israeli forces.
“Today, despite growing evidence that a wide array of U.S. military capabilities are depreciating in value, many remain reluctant to engage in the hard thinking necessary for anticipatory transformation -- preparing for emerging challenges by identifying new capabilities to offset or replace those that are progressively wasting,” Krepinevich writes.
“There are important strategic choices that the United States must make,” he concludes. “To avoid those choices now is simply to allow the United States' rivals to make them instead.”
As part of the Pentagon's ongoing review, Gates is examining the necessity -- and relevance to future threats -- of nearly every major weapon system. This includes how much tactical airpower is required -- specifically, whether the Defense Department can afford to buy all 2,456 Joint Strike Fighters.
Another key area for review is an assessment of how much forcible-entry capability the military requires, which translates to a close look at the need for the Expeditionary Fighting Vehicle as well as the total number of amphibious assault ships the Marine Corps needs, Pentagon officials say. -- Jason Sherman

[Biowatch]

My guess: 2011 more likely.

The spar problems don't seem trivial having been discovered so late.

They have started taxi tests, needed to test braking systems, prove it can go at least 100 kts on the ground, and so forth.

>>A Closer Look: 787 Taxi Testing
By Jon Ostrower
July 8, 2009 3:07 PM
...The tests looked at the low speed handling characteristics of the aircraft by exploring of the anti-skid system, steering, nose gear shimmy and ground loads validation, says a program source...<<
http://www.flightglobal.com/blogs/flightblogger/2009/07/more-on-787-taxi-testing.html

All Nippon Airways ANA is supposed to get the first 787s, and they're getting impatient.
http://boeing.mediaroom.com/index.php?s=43&item=717

[DewDiligence]

Question for anyone: In which calendar quarter do you think Boeing make its first 787 commercial delivery? Sell-side analysts have forecasts ranging from 1Q10 to 4Q11. T.i.a. Dew

[DewDiligence]

Airbus Leads Boeing on 2009 Orders at Halfway Point

http://www.reuters.com/article/marketsNews/idINL872059720090708

›Wed Jul 8, 2009 10:16am EDT

PARIS, July 8 (Reuters) - Airbus sold 58 aircraft in June, the planemaker said on Wednesday, confirming deals that were virtually all announced at the Paris Air Show and leaving it in front of Boeing for the first half of the year.

The larger-than-expected haul brought to 90 the number of planes Airbus has sold this year before cancellations.

But this is down sharply from 525 orders in the first half of 2008 as global aviation battles its way through recession.

Airbus is aiming for gross orders, before cancellations, of "up to 300" aircraft in 2009 but has acknowledged that this figure looks increasingly out of reach as the year progresses.

In June, Etihad Airways of Abu Dhabi cancelled one of its 8 outstanding orders for A340-600 planes, worth $250 million each at list prices, monthly Airbus orders data showed.

So far this year, airlines have cancelled orders for 22 Airbus aircraft, leaving the EADS subsidiary with a net order intake of 68 planes.

Rival Boeing sold 85 aircraft between January and June but airlines cancelled orders for 84 aircraft, leaving it with a positive first-half net order balance of one aircraft.

Airbus delivered 49 planes including 38 single-aisle aircraft in June, bringing total first-half deliveries to 254 aircraft. Boeing delivered 246 aircraft in the first half.‹

[Investorman]

Boeing Agrees to Buy Vought Aircraft 787 Operations (Update1)


By Will Daley

July 7 (Bloomberg) -- Boeing Co., the world’s second- largest commercial-aircraft maker, agreed to acquire Vought Aircraft Industries’ 787 operations in South Carolina for about $580 million in cash.

Vought also will be released from obligations to repay advances, Chicago-based Boeing said today in a statement. The facility in North Charleston performs fabrication and assembly on the Dreamliner’s fuselage. The plant will be managed by Boeing’s 787 program, which is about two years behind schedule.

Vought will continue its work on other Boeing programs, including building other parts for the 787, 737 and 747, Boeing said.

“The financial demands of this program are clearly growing beyond what a company our size can support,” said Elmer Doty, president and chief executive officer of Vought Aircraft Industries.

The 787 was postponed for a fifth time June 23 so engineers can design reinforcements for sections where the wings join the body of the plane. Composite layers in those sections separated during ground stress tests.

[DewDiligence]

Net Commercial Orders 1990-2009: Boeing vs Airbus



The 2009 figures are as of early June. (Source: WSJ)

[chunga1]

BAE Norfolk gets $11.7 million more for LHD-7 work
BAE Systems Norfolk Ship Repair, Norfolk, Va., is being awarded a $11,717,122 modification to previously awarded contract (N00024-05-C-4403) for repairs of the USS Iwo Jima (LHD-7). The following work items will be accomplished on the ship: replace sewage discharge pumps; install scullery steam condensate drain piping; replace fire retardant plywood on ammunition magazine bulkhead; remove & dispose marine coatings containing heavy metals; replace & test flight deck padeyes; replace ventilation ducting and preheater; repair combination steam exhaust/relief valve; replace lube oil tank, fill connection deck fitting; and other work items to support those mentioned. Work will be performed in Norfolk, Va., and is expected to be completed by November 2009. Contract funds in the amount of $11,717,122 will expire at the end of the current fiscal year. The Mid-Atlantic Regional Maintenance Center, Norfolk, Va., is the administrative contracting activity for the contract (N00024-05-C-4403).

[crable]

Wow, I am surprised that OshKosh won. Now the MRAP fleet has another logisitics chain to deal with. I guess the Marines had the majority say on this one

[rdavis8325]

Oshkosh Wins $1B MATV Deal

Oshkosh Wins $1B MATV Deal
By Colin Clark Tuesday, June 30th, 2009 5:10 pm
Posted in International, Land

UPDATED: DoD Announces Oshkosh M-ATV Winner.

Here’s the official contract announcement:

Oshkosh Corporation., Oshkosh, WI is being awarded a $1,055,910,053 Firm Fixed Priced Delivery Order Number 0002 under Contract W56HZV-09-D-0111 for the purchase of 2,244 MRAP All Terrain Vehicles (M-ATVs), Basic Issue Items, Field Service Representative Support, Equipment, Engineering, Authorized Stocking List Parts Packages and Prescribed Load List parts packages. The US Army Tank Automotive Command, Warren, Michigan, is the contracting activity.

The Defense Department announced Tuesday evening that Oshkosh has won a decision — the initial M-ATV contract — with the potential to reshape the Army and Marines for the next decade. Oshkosh won a deal worth $1 billion to build and support 2,244 M-ATVs, a little more than half of the recently pegged requirement.

The Joint Requirements Oversight Committee announced earlier this month that the requirements for M-ATVs is an impressive 5,200 vehicles, which may mean as much as $5 billion is at stake just for the M-ATV award. Given what Defense Secretary Robert Gates has said about MRAPs becoming the new vehicle for the FCS follow-on, the M-ATV award may become as important to the Army as the decision to cancel the Manned Ground Vehicle has become.

The players in this part of the drama are BAE Systems; Oshkosh Corp., Navistar International and Force Dynamics, a joint venture between Force Protection Inc. and General Dynamics. Each company was contracted to build at least several test vehicles.

If the Marines have much to say about the contract award — and they should given their numbers in Afghanistan — I’m giving Oshkosh a leg up on this one. The Oshkosh vehicle is built on the Medium Tactical Vehicle Replacement (MTVR) chassis and uses the TAK-4 suspension, which more than 10,000 MTVRs use. And senior Marine leaders have been very publicly enthusiastic about the MTVR’s performance in Afghanistan. Let’s hope there are no protests.

http://www.dodbuzz.com/2009/06/30/matv-decision-likely-tuesday/

[DewDiligence]

Is Boeing Worth Less Than Zero?

[Of course not! However, as of 3/31/09, BA’s GAAP book value was negative, owing to a non-cash boost to the company’s actuarial pension liabilities.]

http://www.forbes.com/2009/06/17/boeing-book-value-markets-equities-accounting.html

›by Peter C. Beller
06.17.09

Few things are as painful to corporate chieftains as seeing the net worth of their companies evaporate overnight. Book value--a company's assets minus its liabilities--is how Warren Buffett prefers to measure business success, and when Berkshire Hathaway's fell by 9.6% in 2008, he felt the need to apologize to shareholders. That looks like a scraped knee next to the massive head wound Boeing suffered in the final quarter of 2008 when its net worth fell from $8.7 billion to negative $1.4 billion.

Unlike Buffett, the aerospace giant barely gave notice. In a January conference call with analysts, Boeing's chief financial officer mentioned an "increased pension liability" resulting in an "equity adjustment," which "produced a negative book equity as of year-end."

He was quick to say it wouldn't hurt the firm's ability to pay dividends and repay debt. None of the Wall Street analysts on the call raised the issue when it came time for questions.

When balance sheets blow up like this, the culprit is usually a write-down of, say, a big acquisition for which the company badly overpaid. In this case, Boeing wrote down the value of its own pension fund after losing $8 billion in the market crash that followed Lehman Brothers' bankruptcy. That loss in the pension portfolio, a mix of stocks and bonds, appeared on the balance sheet--but not on the asset side--and is nowhere to be found on the income statement.

Up until a few years ago, companies were allowed to smooth out the values of their pensions to compensate for the volatile stock market. Predictably, companies abused this allowance to make their pensions look healthier than they really were, according to the government. By 2004, the S&P 500 had racked up shortfalls totaling $165 billion, figured Credit Suisse. Alarmed by this hidden deficit, the Financial Accounting Standards Board, which sets corporate accounting policy, ruled that, in a nutshell, companies must mark their pensions to market every quarter. For big, old manufacturing companies with huge pensions, like Boeing and General Motors, that's a big deal. Boeing's pension nearly matches the company's other assets.

But what should shareholders make of it? A negative book value suggests a firm in mortal danger. If your local bank currently sports one, set up a lawn chair this Friday and wait for the Feds to arrive and shut it down. In contrast, Boeing has been hurt by the financial crisis, but it isn't likely to go out of business anytime soon.

"It's an odd situation to be in but not something that affects our ability to do business," says Boeing spokesman Todd Blecher.

The decline in Boeing's pension assets means the firm will need smarter investments or will have to pony up additional funds to pay its retirees. So the increased liability is real. But pension accounting makes use of a lot of guesswork--when workers will retire, how long they'll live and what the stock and bond markets should return over the next 30 years. Boeing lowered its forecast of investment returns to reflect, in part, today's rock-bottom bond yields. If you think the recession will turn into a depression, that makes sense. But you'd be betting against Warren Buffett, who argues stocks will probably resume their historical gains. It's certainly reasonable to think that lopping 37% off the stock market in 2008 will lead to higher, not lower, investment returns in the future. If that happens, Boeing's book value could soar for the same reason it sank.

"The thinking before was these are very long-term obligations that may or may not prove to be real, and let's take them into account over time," says Charles Mulford, accounting professor at the Georgia Institute of Technology. The new rule makes things more complex but also provides a "more complete picture of the improving and declining fortunes of shareholders."

The FASB is still on a crusade to get pension details out of the financial footnotes and onto the quarterly statements many investors read, says Mulford. The next step is to record pension plan ups and downs on the income statement, where they currently appear in small doses over time the way they used to on the balance sheet.‹

[DewDiligence]

Boeing Feels Pressure to Placate 787 Buyers

[In some cases, cancellations will permit Boeing to fill orders more quickly, thereby averting monetary penalties,]

http://online.wsj.com/article/SB124623181190966225.html

›JUNE 29, 2009
By PETER SANDERS and DANIEL MICHAELS

The latest delay to hit Boeing Co.'s 787 Dreamliner has complicated an intricate set of negotiations, giving airlines a chance to wrangle concessions from the plane maker on delivery dates, installment payments and even the final purchase price.

Already nearly two years behind schedule, the Dreamliner was the fastest selling commercial airplane in Boeing history – at one point over 900 orders were on the books. After a spate of cancellations that number is now closer to 850. Last Tuesday, Chicago-based Boeing said a structural flaw detected during ground tests required additional reinforcement on the Dreamliner, a problem that will delay the plane's first test flight, possibly for months.

Delivery delays can wreak havoc on an airline's ability to plan its routes and schedules. But they also can provide an opening to renegotiate complicated contracts that govern airplane purchases.

Boeing is coming under pressure from its customers to offer fresh concessions. Industry officials say that Boeing has recently stopped discussing compensation terms for delays to the 787 and they speculate the company is waiting until its actual delivery schedule is clear.

"We want to discuss compensation, but Boeing hasn't opened the books," said an official at one Dreamliner customer.

Already, the delays have cost Boeing millions of dollars in penalties and concessions to customers.

"Our focus is always on our customers and as we've done throughout the development program, we will work closely with them regarding the program and the impact of this issue," says a Boeing spokesman.

Even before the recent delays, some airlines were getting frustrated with Boeing's frequent schedule changes. Akbar Al Baker, chief executive of Qatar Airways, threatened to cancel orders for both 787s and larger 777s, which are now in production, because of disruption caused by problems at Boeing.

"Boeing doesn't realize how much they're hurting their customers' plans," Mr. Al Baker said at the recent Paris Air Show. Qatar Airways has firm orders for 30 787s and options for 30 more. The first were due for delivery in 2011 but that arrival date is now uncertain.

Boeing says its delivery timetable for the aircraft hasn't been updated. A Boeing spokesman said the company was trying to work with Qatar Airways to resolve problems.

Airlines worldwide are struggling with rising oil prices and falling passenger revenue. Fitch Ratings recently downgraded the corporate ratings of UAL Corp. and Delta Air Lines Inc.

Actual cancellations are rare, but last week Australia's Qantas Airways Ltd. said it scratched orders for 15 787s and delayed deliveries on 15 others slated to arrive in 2014-15. Qantas -- which remains the largest Dreamliner airline customer with 50 planes still on the books -- had some leverage to cancel because of its large number of orders, industry observers say. Qantas also retained options to buy dozens more of the planes.

Qantas executives cited a global economy that is far different today than it was when it placed the order in 2005. It said it had been in discussions with Boeing for months.

For Boeing, the cancellations have a silver lining. The jet maker now has a little more breathing room it can use to fill remaining orders more quickly, thereby avoiding some penalties.

"From Boeing's perspective, that's not necessarily bad news when you have a rollout going this poorly," says Peter Barlow, an aviation attorney with Smith, Gambrell & Russell LLP. "The way purchase agreements are drafted, a savvy purchaser will obtain daily damages, and if a plane isn't delivered on time, the customer receives a daily penalty [from the manufacturer] that can be a very big number."

Though the 787's list price is roughly $178 million [actually, list prices range from about $150M to more than $200M because there are three different models of 787’s], customers typically receive discounts. The price negotiated at the time of the order is rarely the price paid when the plane is delivered years later.

Typically, customers make "pre-delivery payments" every six months, beginning about 18 months prior to delivery, that amount to around 30% of the total purchase price. Payments often escalate as the delivery date approaches, says Mr. Barlow. Everything in that process is negotiable, Mr. Barlow says.

Several carriers, including Air New Zealand Ltd., British Airways PLC and Virgin Atlantic Airways Ltd., are coping with 787 delays by ordering current-model planes from either Boeing or Airbus, a unit of European Aeronautic Defence & Space Co.

Virgin, for example, last Monday announced an order for 10 Airbus A330s, which are slightly larger than Dreamliners and not as cutting-edge, but are available next year and in 2011.

"We weren't prepared to have six years of no new aircraft being delivered," said Virgin spokesman Paul Charles. He said Virgin is still talking to Boeing about compensation.

"We would like to see the compensation reflect the ongoing delays," Mr. Charles said.

Ethiopian Airways, one of the first airlines to order 787s, has kept its order even after bank-financing that it had arranged fell apart, according to a banker familiar with the situation. The airline will instead initially finance its purchase with its own cash, this person said. Officials at Ethiopian Airways didn't respond to requests for comment.‹

[DewDiligence]

More on the Boeing Dreamliner delay for engineering types:

http://www.flightglobal.com/blogs/flightblogger/2009/06/a-closer-look-understanding-th.html

›Understanding the 787 Structural Reinforcement

By Jon Ostrower
June 24, 2009 5:59 PM

Boeing yesterday announced it was postponing first flight of the 787 citing the need to reinforce structure where the wing box meets the center wing box at the side of body of the aircraft. FlightBlogger takes a closer look at exactly what the problem is and how Boeing came to yesterday's announcement.

Because of the need to go back into the detailed design phase for this fix, combined with the need to fabricate, install and test at component and at full scale levels, several sources with a direct familiarity to the situation estimate that the fix will take "months not weeks." [Anything less than six months is highly unlikely, IMO.]

The issue centers around the wing-to-body join that mates the wing box (Mitsubishi/Section 12) and the center wing box (Fuji/Section 45/11). The center wing box is the combination of two pieces, the center wing tank (Section 11) and main landing gear wheel well (Section 45). The area of concern centers on the 18 points where Sections 11 and 12 meet.

Digging deeper, the 18 points in question on each side of the airplane (36 total) are located on the top panel of the center wing box and run port to starboard inside the structure of the center tank through to the other wing. These 18 'stringers' inside the center wing box are matched by 17 stringers on the wing box, which serve to stiffen the wing skin. The wing box has 17 stringers, but a source indicates they are designated 2-18, hence the reference to the 18 points that need to be reinforced.

The composite stringers, which give the wings its longitudinal stiffness, are cured during production when cooked in the autoclave and joined as a single bonded piece with the wingskins.

On the inboard side of the wing box where the 17 stringers end and connect to the center wing box, each has what is known as a 'stringer cap' that widens at the end and actually makes the hard connection between Section 11 and Section 12 on the side of body. The stringer caps on ZY997 sustained damage, albeit repairable, when the wings were flexed in late May.

Boeing confirms that small areas of the wing structure separated or "disbonded" from the wing skin, though declined to specify exactly where. Sources directly familiar with the situation say the shifting tension load from the stringer to fastener head also caused damage on the structure.

HISTORICAL PRECEDENT

In February 2006, nearly a year after A380 had begun its flight test program, Airbus was conducting testing on MSN5000, the static test airframe when the wing "ruptured" during ultimate load testing. The wing was being flexed to 150% of limit load when the wing broke between the inboard and outboard engines.

At the time, the wing was deflected 24.3 feet at 147% of limit load, below the 150% requirement for certification. Airbus said it designed the A380 wing to break just beyond 150% citing strict adherence to its weight reduction program. Airbus said it demonstrated the structural improvement, not through full-scale testing, but through further "finite element models to prove the adequacy of the structure on production aircraft."

Later that summer, Airbus was required to install a 66 lb wing strengthening package on the existing A380 fleet, starting with MSN003, the first superjumbo for Singapore Airlines that entered service in October 2007. The European airframer decided that wings delivered from MSN018 on would have the modifications incorporated prior to delivery to final assembly in Toulouse.

Airbus was able to verify the viability of the fix as a part of its certification documents supplied to the FAA and EASA for final analysis and approval.

TIMELINE - Updated

Late May: Boeing experiences the first signs of trouble on the static airframe. During that test, the wings of ZY997 were flexed and the strain measurements on the stringer caps were reading higher than predicted.

Previously, on April 21st, Boeing conducted the limit load test which saw the wings deflected over 17-feet and an equivalent of 120-130% of maximum load.

"We went in and did some inspections and saw a number of things indicative of what the strain gauges were saying," said Scott Fancher, vice president and general manager of the 787 program, said on yesterday's teleconference, implying that the test had left visible damage to the structure during the late May testing.

The 1G check out of the wing, which was conducted in late-March, would not have stressed the join hard enough to yield the same results. Previous rumors of delamination from December 2008 still stand as false and unrelated to the current situation which came directly from testing this past spring.

Early June: Preliminary analysis showed that the aircraft was still cleared for first flight, though with a reduced flight envelope. Sources indicate that the original plan was to fly ZA001 and ZA002 on their respective maiden flights to BFI as planned then park the aircraft while a fix, which was considered to be "relatively minor" at the time, was developed that would allow an expanded flight test envelope, though Boeing says this plan was never in consideration.

Scott Carson, CEO of Boeing Commercial Airplanes, said yesterday that "the airplane could enter flight test with a credible flight test envelope as [the company] worked relatively minor modifications."

June 19: Boeing completes final detailed analysis on the stringer caps and decides to postpone first flight.

"The work done by the team through the week last week narrowed the envelope to the point where on Friday we determined that to fly would be such a small envelope for us that it would be an interesting exercise in having the airplane in the air but not particularly useful in terms of preparing the airplane for certification," Carson said.

June 23: Boeing makes a formal announcement of the first flight postponement. The change in first flight was unknown to many of those closest to the airplane. As late as the evening of Monday, June 22, sources indicated first flight had shifted to July 2nd at 10 am after holding at June 30th for more than a week before and during the Paris Air Show. Boeing says that the July 2nd date was never formally approved for first flight.

THE FIX

Boeing says it will be several weeks before it announces a new schedule for first flight and first delivery.

Several tasks have to be accomplished before 787 is cleared for first flight:

• Develop the modification & concurrently repair ZY997.

• Test the modification on a component level.

• Install the modification on ZY997.

• Conduct full-scale tests on ZY997.

• Install the modification on ZA001.

"We have to give the team time to do time necessary to do this job," said Fancher. "While we will proceed with urgency, we will not compromise the process for the sake of schedule."

The fix, once identified, will be able to be installed on the aircraft in the factory, the flight line and at supplier partners without any anticipated schedule disruption.

Carson affirmed that the production plan will proceed as planned with a 10 aircraft/month ramp up targeted for 2012.

"At this point, that's our judgment that we will continue with the build up that we had previously anticipated."‹

[DewDiligence]

What Boeing's 787 Delay Means to You

[This article from Fortune may be unduly bullish, but it’s the best piece I’ve read on the Dreamliner delay.]

http://money.cnn.com/2009/06/24/news/companies/boeing_787_delay.fortune/index.htm

›By Michael Copeland
June 24, 2009: 3:52 PM ET

SEATTLE (Fortune) -- We now know that Boeing's super-cool, and super-late, 787 Dreamliner is going to be earthbound a bit longer. The world's largest commercial aircraft maker announced that during "static" testing they noticed stress where the wings are joined to the body of the plane, a factor that hadn't been predicted in computer models.

The ground testing is rigorous; this wasn't a case of some beefy guy with a big wrench who stepped on the wing in the wrong place. Engineers found the problem during a phase of safety testing when engineers literally take the wings of the plane and bend them until they practically touch.

Still, it's not a problem anyone wants when the world's first mostly composite commercial airliner is days away from its critical first flight. This is a plane with a $150 million price tag that is more than two years behind its original schedule and has yet to exhibit the really nifty and useful thing about planes -- flying.

What this latest delay means to you depends on which part of the Boeing constituency you inhabit: the flying public; an investor; or an airline waiting for its planes. Let's start with those of us who are going to get on this new jet: the flying public.

The obvious question, is this thing going to be safe? Stress where the wings meet the body, after all, doesn't sound reassuring. Boeing officials were clear in a conference call Tuesday that there is a simple fix for the problem, which requires a handful of reinforcing parts applied to 36 areas on the wings about the size of one or two square inches each. "We have seen nothing about what led us to the discovery that would lead us to broader concerns with the test or flight programs," said Scott Fancher, the 787 vice president and general manager, during the conference call. If the problem had been discovered months ago, Fancher added, rather than days before the plane was supposed to fly, the 787 team would have simply fixed it and moved on, probably without any grand public statement.

Fancher is not blowing smoke. It is not uncommon for new commercial planes to have issues late in the game, even so close to the first flight. What makes it more painful in this case is that it comes after so many previous delays [six in all]. Designing and building a new commercial jet is a phenomenally complex process. The Dreamliner even more so. Not only does it use new materials, chiefly composites, but Boeing is also using a new process to get the plane built drawing on suppliers across the world to manufacture parts, which are assembled into the complete airliner at the company's sprawling plant in Everett, Wash.

Clearly, Boeing doesn't have the process nailed yet, but it is building a safe plane. Not only that, with bigger windows and a climate-control system that more closely approximates sea level, it ought to be more of a pleasure to fly than the aluminum tubes in the sky today.

If you are an investor you might be a little less sanguine. Boeing stock has fallen more than 8% since the delay was announced Tuesday [actually 12% as of today’s close]. Still, it has been on a run lately, up almost 50% since its March lows. There are plenty of folks who feel that Boeing stock got ahead of itself, after being beaten down so low earlier in the year.

How you view the share price depends on whether you are investing for the next six months to a year or longer term, says Alex Hamilton, director of research at Jesup & Lamont, who has a "hold" on the stock. "Financially, first-flight means nothing, it doesn't put another cent in Boeing's pocket," he says. "It was psychological more than anything. What keeps getting Boeing in trouble is setting these bogies [dates] and missing them. They need to keep quiet and just get that plane in the air."

Missing first-flight does push everything out, however, Hamilton says. "It calls into question whether we can believe they can start to deliver planes in the first quarter of 2010, whether they have the manufacturing process down, and whether they can produce ten aircraft per month as they have planned." As things slip, so might Boeing's earning power in the near-term. If it can't deliver planes, it doesn't get paid, and indeed faces penalties that it must pay customers. Boeing will assess and announce what the financial impact of the delay might be during its second-quarter earnings report next month. In the coming weeks it will also pick a new date for first flight.

That's the near-term. Longer-term as an investor, you need to consider whether Boeing gets its manufacturing process straight and if the 787 is the breakthrough aircraft Boeing thinks it is. What the 787 offers chiefly is much better fuel efficiency in a package that lowers maintenance costs and opens up new long-distance routes that were simply uneconomic. "Long-term it's a game changer," Hamilton says. "And if you change the game, and you are the market leader, you are in a tremendous position."

Which brings us to the airlines that are hoping Boeing will help them change the tough economics of their business. Boeing has pre-sold more than 860 of these planes, the fastest pace in history for a new airliner. When the global recession hit, the delay to the 787 wasn't as keenly felt as it otherwise would have been, since the airline industry saw its business plummet. Not taking delivery of expensive planes that they couldn't fill anyway wasn't such a burden. Today, however, airlines are more eager to get delivery, as some see signs of air-travel ticking back up.

Airlines in India and China are signaling they may be ready to buy new planes, as are some giant commercial-jet leasing companies that have been sitting on the sidelines during the recession. The cost of jet fuel is climbing again, and so having an efficient plane is more desirable than ever.

First in line for the 787 is All Nippon Airways, which didn't take the news of the delay well. "We are disappointed that the first flight of the 787 will be postponed, and urge Boeing to specify the schedule for the program as a whole as quickly as possible," ANA said in a statement.

But here's the thing. No matter how disappointed they are, ANA and the dozens of other customers will wait for the 787. Sure it's two-plus years behind, but Boeing's only real competition in the commercial airline business, Airbus, won't have a new plane ready with similar features [the A350 model] until 2013 or 2014, and that assumes they don't have their own delays. "If Boeing slips this plane another six to nine months, it might hit their 2010 earnings," says Rick Whittington, a principal with Sarasota, Fla.-based independent aerospace research firm JSA Research.

"Investors don't like it, and the customers aren't happy about it, but they are not going to cancel orders because there is nowhere else for them to go."‹

[DewDiligence]

BA was off 6% today, making a 12% loss over two days. The
incessant Dreamliner delays are narrowing the time window
between the launch of the Dreamliner—now expected to occur
in 2011, according to Morgan Stanley—and the launch of the
A350. Sooner or later, this has to cost BA a significant number
of Dreamliner orders, if it hasn’t done so already.

http://www.reuters.com/article/marketsNews/idESBNG54453820090624

›Morgan Stanley Sees 787 First Delivery in 2011

Wed Jun 24, 2009 9:04am EDT

June 24 (Reuters) - Morgan Stanley said it expects the first delivery of Boeing Co's Dreamliner to be pushed to 2011 and downgraded the stock to "equal-weight" on Wednesday, a day after the planemaker postponed the first test flight of the 787 plane for a fifth time.

"We prefer to stay on the sidelines while Boeing resolves material issues with the 787 program," said Morgan Stanley, which previously rated the stock "overweight."

On Tuesday, Boeing said it delayed the test flight to reinforce an area within the side-of-body section of the aircraft. Boeing gave no new date for the flight or the first delivery, which also would be rescheduled.

The revolutionary carbon-composite aircraft, already two years behind its original schedule, was to fly in the second quarter of 2009 with the first delivery scheduled for the first quarter of 2010.

The delay driven by unexpected stress on the plane parts and the management's limited knowledge of this development shows that this program is too risky to warrant an overweight rating, analyst Heidi Wood said in a note to clients.

That the models did not predict these stress points could result in the Federal Aviation Administration seeking more data, which could slow down the certification process, she added.

"What worries us is the potential for more negative insights through the certification phase," [no kidding] Wood said, adding that the risk of further negative developments and rising costs ahead is higher than originally anticipated.

The analyst also lowered her 12- to 18-month price target on the stock to $50 from $60. Beyond market driven action, Boeing could be range bound between $35 and $50 potentially through the rest of this year, she noted.‹

[DewDiligence]

More on the Dreamliner delay:

http://www.nytimes.com/2009/06/24/business/24boeing.html

Analysts said the company’s flight test schedule was so tight that the delay of several weeks would certainly push back plans to deliver the first 787 by next March.

“There’s no way that will hold,” Richard Aboulafia, an analyst at the Teal Group, said. “This is a pretty late stage in the preflight test schedule to be finding structural showstoppers.”

And that only heightens concerns that Boeing could find more problems once the test flights begin. “This removes any hope that they’d gotten a handle around the likely risks of things they could find during the flight test program,” Mr. Aboulafia said.

Robert Springarn, an analyst at Credit Suisse, said in a note to investors that the first delivery could be delayed until the fourth quarter of 2010, and Boeing might be able to deliver only six planes next year instead of what Credit Suisse had previously expected to be 33. He said the ramp-up in production could also be slower than expected in 2011 and 2012.

[DewDiligence]

Video re A320 assembly in Tianjin, China:

http://www.thestreet.com/video/index.html#27290978001

Airbus says 15% of its aggregate unit orders of all commercial models are for Chinese airlines.

[DewDiligence]

UAV video from Paris Airshow:

http://www.thestreet.com/video/index.html?clipId=10523100