Boeing takes $2.8 billion from defense business, sticks to cash target

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Oct 26 (Reuters) – The struggling defense business of Boeing Co (BA.N) took a $2.8 billion charge on Wednesday, but the U.S. aircraft maker stuck to its forecast to generate cash this year despite struggling to ramp up production of commercial aircraft due to labor and supply shortages.

Cost overruns at Boeing’s defence, space and security unit have hampered the company’s recovery as it tries to emerge from successive crises by taking advantage of growing demand for air travel.

The aircraft manufacturer said it supported its Air Force One program and refueling program, among others.

“Our revenues and earnings were significantly impacted by losses on fixed-price development programs in our defense businesses, driven by higher manufacturing and supply chain costs,” the Boeing chief executive said. , Dave Calhoun, in a message to employees.

Boeing shares fell 0.5% to $145.92 in premarket trading shortly before the opening bell.

Rising cost pressures in recent months have hampered fixed-price contracts for U.S. aerospace and defense companies, prompting an industry body to ask the U.S. Congress for inflation relief.

Boeing has appointed senior troubleshooter Steve Parker to help turn around loss-making programs at its defense unit, Reuters reported on Tuesday.

Commercially, it delivered 86 MAX jets in the quarter, or just under 30 per month, according to company data. It needs to deliver about 44 jets a month in the fourth quarter to hit its “low 400” 737 MAX delivery target this year.

The company said while demand for commercial aircraft remains strong, supply chain constraints continue to challenge the industry.

General Electric Co said on Tuesday the aviation industry was still facing labor, parts and raw material shortages, although some of the constraints showed “early signs” of easing.

To speed up production, Boeing said it added more than 10,000 employees this year and is investing in training and development to improve productivity.

Adjusted loss per share in the third quarter widened to $6.18 from $0.60 a year ago. Quarterly revenue increased 4% to $15.96 billion.

Demand in the global service industry that provides spare parts and services such as jet conversions was a bright spot in the quarter through September, with revenue up 5%.

Reporting by Abhijith Ganapavaram in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Arun Koyyur, Kirsten Donovan

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