Dreamliner costs add up for Boeing
The negative publicity surrounding the new plane will haunt the company for years. Still, Wall Street remains confident the safety issues will be resolved.
The Chicago company will probably spend several hundred million dollars to redesign the controversial batteries in the plane that have drawn concerns. Regulators around the world have taken the unusual step of ordering the aircraft grounded.
As The New York Times notes, Boeing also may have to pay up to $1.5 million a day in penalties to carriers who have purchased the plane. United Airlines (UAL) is the only U.S carrier that flies the Dreamliner.
The timing of these safety issues comes as Boeing had planned to ramp up production of the $207 million jetliner. Of course, the damage to the company's reputation may take years to repair.
Meanwhile, regulators still have to figure out why the plane's lithium-ion batteries have malfunctioned. Investigators from the National Transportation Safety Board examined a battery from a plane that recently caught fire in Boston and found that it did not exceed "its designed voltage of 32 volts." That's bad news, because an overcharged battery was blamed for a fire in Japan.
If there are two separate Dreamliner battery problems, that could "potentially delay Boeing's effort to persuade regulators to allow the planes back into service," the Wall Street Journal says.
Wall Street, though, still has faith that Boeing will solve the Dreamliner's problems eventually. Shares of the aerospace company have not budged much in the wake of the negative publicity. To date, Boeing has just delivered 50 of the 850 Dreamliners that airlines have ordered. The average 52-week price target on the stock is $88.58, about 18% higher than where it currently trades.
Carriers are keen on the 787 because it is far more fuel efficient than more conventional aircraft, enabling them fly passengers farther, faster and cheaper. If Boeing can resolve the safety issues, the Dreamliner stands to be a big money maker.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
More on Money Now
- Silver coins the new hot haven investment?
- More grown children finally leaving the nest
- Chipotle hints at a price increase
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Tired of constantly dying batteries, she came up with a device that could revolutionize energy storage -- and won $50,000 from Intel.
- Detroit in hot water over proposal to sell art
- Sears spirals toward oblivion
- Why aren't heads rolling at the IRS?
- Do we pay attention to roads and bridges now?
- Yahoo may be going after Hulu
- Apple's first computer could fetch $450,000
- AT&T adds sneaky fee onto its wireless bills
- Soaring ER use adds more pain to health costs
- Netflix gets 'Arrested Development' stars cheap
[BRIEFING.COM] Stocks entered the weekend on a mixed note as the S&P 500 shed 0.1% while the Dow ended with a gain of 0.1%.
The major averages began the day on a lower note as nine of ten sectors saw losses of more than 0.5%.
The consumer staples sector was the lone exception as the group spent the entire day in positive territory thanks to the relative strength of Dow component Procter & Gamble (PG 81.89, +3.19). The second-largest staple stock advanced ... More
More Market News
Try as the bears might, they couldn't break U.S. stocks. But investors still face frothy prices and considerable headwinds.