LOS ANGELES The
worst is yet to come for defense contractors facing the impact
of federal budget sequestration, Boeing Co. warned this
While Boeing has seen
"some impact of sequestration," it anticipates an even
greater impact, including "some pretty draconian types of
scenarios," Jim McNerney, chairman, president and chief
executive officer of the Chicago-based aerospace company, said
during an earnings call.
"We are not out of the
woods at all," he said, without detailing the probable effects
of further cutbacks. "We are just entering the woods.
Boeing is diversifying
its defense and military business outside the United States,
the company said. Backlogs at its Defense, Space & Security
segment increased to $71 billion during the second quarter, 37
percent of which comprised orders from foreign customers.
deliveries of commercial aircraft rose 12.7 percent over the
same period last year to 169, pushing deliveries for the first
half up 6.6 percent to 306 planes.
income of $1.09 billion rose 12.5 percent from $967 million a
year earlier on sales that gained 9 percent to $21.82 billion
from $20.01 billion.
For the first six
months of the year, net income totaled $2.19 billion, up 16.1
percent from $1.89 billion a year earlier, on revenue that rose
3.4 percent to $40.71 billion from $39.39 billion.
dispatched just 17 of its wide-body 787 Dreamliners in the
first half as issues with its lithium-ion batteries temporarily
suspended deliveries, Boeing expects to deliver more than 60 of
the planes this year, McNerney said. The company is currently
producing Dreamliners at a rate of seven per month and expects
to build them at a rate of 10 per month by year-end, which he
said is Boeings "number one priority," at plants in
Everett, Wash., and North Charleston, S.C.
There is pressure to
raise production further, McNerney said. This is being driven
by demand for the newer and larger 787-9 and 787-10 versions of
the Dreamliner, the former of which is due for its first flight
later this year, and a growing marketplace "could move us (in
the) direction" of boosting output.
While boosting output
is "never easy," McNerney added that Boeing is assessing how to
raise the production rate of its top-selling 737 narrow-body
airliner beyond 42 per month, a rate it is slated to reach in
the first half of 2014.