Boeing Reports First Annual Loss In Over 2 Decades
ARI SHAPIRO, HOST:
Today, Boeing reported its first annual loss in more than two decades. The company has been struggling since the grounding of its 737 Max planes after two crashes that killed 346 people. Boeing says it expects costs related to the Max crisis to approach $19 billion, and yet today, Boeing stock went up.
Here to explain is Javier David, editor with Yahoo Finance. Hi there.
JAVIER DAVID: Hey. Good afternoon.
SHAPIRO: Let's start with this annual earnings report. The Boeing 737 Max has been grounded for so long. Did the loss really come as a surprise?
DAVID: The loss in and of itself didn't really come as a - entirely as a surprise. I think last year, they did post a quarterly loss. I think the annual loss - the fact that all of these costs have been aggregating and it ended up just basically wiping out any profit for the year came as a surprise to most of Wall Street. And most of the analysts have a - we - what we use as business reporters is we look at the consensus of everything that Wall Street expects to happen in a particular company's particular earning report. So all of them had expected a profit of some sorts, but everyone had anticipated that on some level, the 737 Max was going to take a toll on the bottom line.
SHAPIRO: So we knew there would be a drag. We just didn't know how much. So...
DAVID: Right. Precisely.
SHAPIRO: That obviously has implications for Boeing. But given the size of this company, it can also have implications for the U.S. economy as a whole. Are we seeing that?
DAVID: Well, absolutely, and I think that's the second part of this. Boeing, being such a large company and particularly a manufacturer of airplanes, the supply chain kind of has - or these bottlenecks that are created when they're not producing planes have spillover effects for the economy. So usually, that shows up in economic data like manufacturing and monthly statistics. So we look at - in terms of industrial production and manufacturing output. So economists...
SHAPIRO: So as those numbers come out, we might expect to see a drag.
DAVID: Right. And we've already been seeing that. Last month's survey did show a pretty significant drop in both industrial production, as well as manufacturing output, and a lot of that is attributable to the halt in production of the 737 Max.
SHAPIRO: That all sounds pretty bleak. So explain why Boeing stock actually went up today.
DAVID: Well, I think investors are taking sort of a long view. I think they - the short answer is it could've been worse. I think that there's a little bit of encouragement that the company is kind of getting it all out at once. You may recall that Boeing actually fired its CEO last month...
DAVID: ...In the wake of all of these scandals that seem like on a daily basis, there were these new disclosures that the company had forewarning of some sort that there were problems with this plane. But they either blew it off or ignored it or sort of downplayed it or what have you. And in the wake of that, the CEO exited. Now there's a new guy on board, Dave Calhoun. People are looking to him, and he is sounding all the right notes. And I think that for investors, he basically reassured them that, you know, we're getting this under control.
DAVID: Now, how long it will take them to do that, we just don't know. But at least at - for this - at this point, Wall Street sees it as a sigh of relief.
SHAPIRO: Do you think that Wall Street confidence reflects a sense that Boeing is, in a sense, too big to fail?
DAVID: It may very well be. I mean, if you recall in other products or industries where companies put products on the market that they ended up having to recall, they take a charge against their earnings, and they just kind of move on to the next thing. Boeing is so massive, and I think a big part of it is they have these other business lines, like defense and...
DAVID: ...Space, that actually bolster the bottom line. And they're - those are doing fairly well, even though there has been some attrition in those areas as well.
SHAPIRO: That is Javier David, editor at Yahoo Finance. He focuses on markets and the economy.
Thank you for joining us today.
DAVID: Thank you, Ari. Have a good day.
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