mjoelnir
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Post by mjoelnir on Feb 3, 2020 18:52:38 GMT 1
You must not create your own definitions. They cost more than the average COST over the accounting block. Deferred cost has nothing to do with selling price! So you are just wrong, because you forget exactly that profit I was writing about? You can expect a margin between the average cost and the selling price. Usual cross margins are at least 30-40%. So the 30B profit are likely at the lower end. You forgot to consider the learning curve of production cost. Based on the analysis out there, learning curve is ~ 80%. Back in early 2018, production cost was estimated by Leeham to be 80~90M per frame and avg sales price 125M. At the end of 2017, Boeing delivered 636 frames and if we added another 2 month of production (~12/month at the time IIRC) that'll give us 660 frames ish. # Frame Built | Estimate Production Cost | 660 | 85M | 330 | 106.3M | 165 | 132.8M | 83 | 166M |
Current delivery stands at 939 and just rough estimate that from 660-939 we earn 11B. Frame 330 to 660 we earn 6.2B. Frame 165 to 330 we lost 1.3B. Frame 83 to 165 we lost 3.4B. --> Earning 11+6.2-1.3-3.4 = 12.5B and the deferred production cost is still 18B. Just from the rough estimation here, I don't think we reach break-even yet .... Not even mentioned the estimation for first 83 frames will cost even more and launch customers will get very steep discount that may be at least on par with what Hawaiian was getting back in 2018 (Leeham estimate less than 115M or even less than 100M per frame). The deferred cost from frame 1 to about 450 was 30 billion USD. That is a fact. 66 million USD production cost was deferred on average per frame through that period. So I believe that the production cost you calculate for this frames is far off. And regarding the production cost of the 787, the basic frame does not offer the same things today as the first frames. Lightning protection was reduced on the frame and on the wings for example. Humidity control became optional.
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sciing
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Post by sciing on Feb 3, 2020 18:57:07 GMT 1
At least you both accept there was a profit margin and as I wrote this profit has to be compared to residual deferred cost block and development cost for program breakeven. Th height is unknown, but as every in industry brutto margin (price vs direct production cost) of 40% is nothing unusual. I did not say that Boeing is now at break even, but it will be long before deferred cost block is zero. A profit margin is a real margin when you use normal accounting practices. If you keep to IFRS you get very secure numbers. At Boeing, with their playing on the program for cost accounting, you never know if there is a real margin. There is a gap between the planned average cost and the price. This gap is already planned for the business case long before anybody knows how expensive building the frame really is! So this profit is quite clear and because it so clear Boeing is using that it for Program accounting instead of the real cost. The difference to real cost is deferred cost. What you are telling is the complete opposite what would make any sense. I do not know why, maybe just because you are Boeing hate boy and saying Boeing is making profit is kind of freezing hell for you.
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Post by kevin5345179 on Feb 3, 2020 19:38:44 GMT 1
You forgot to consider the learning curve of production cost. Based on the analysis out there, learning curve is ~ 80%. Back in early 2018, production cost was estimated by Leeham to be 80~90M per frame and avg sales price 125M. At the end of 2017, Boeing delivered 636 frames and if we added another 2 month of production (~12/month at the time IIRC) that'll give us 660 frames ish. # Frame Built | Estimate Production Cost | 660 | 85M | 330 | 106.3M | 165 | 132.8M | 83 | 166M |
Current delivery stands at 939 and just rough estimate that from 660-939 we earn 11B. Frame 330 to 660 we earn 6.2B. Frame 165 to 330 we lost 1.3B. Frame 83 to 165 we lost 3.4B. --> Earning 11+6.2-1.3-3.4 = 12.5B and the deferred production cost is still 18B. Just from the rough estimation here, I don't think we reach break-even yet .... Not even mentioned the estimation for first 83 frames will cost even more and launch customers will get very steep discount that may be at least on par with what Hawaiian was getting back in 2018 (Leeham estimate less than 115M or even less than 100M per frame). The deferred cost from frame 1 to about 450 was 30 billion USD. That is a fact. 66 million USD production cost was deferred on average per frame through that period. So I believe that the production cost you calculate for this frames is far off. And regarding the production cost of the 787, the basic frame does not offer the same things today as the first frames. Lightning protection was reduced on the frame and on the wings for example. Humidity control became optional. I'm only estimated based on the "overall" learning curve which might be steeper (777 is 74%) and not constant overall. Also, they reclassified few more frames as R&D cost which removes deferred cost later on pretty significant.
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mjoelnir
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Post by mjoelnir on Feb 3, 2020 20:35:15 GMT 1
A profit margin is a real margin when you use normal accounting practices. If you keep to IFRS you get very secure numbers. At Boeing, with their playing on the program for cost accounting, you never know if there is a real margin. There is a gap between the planned average cost and the price. This gap is already planned for the business case long before anybody knows how expensive building the frame really is! So this profit is quite clear and because it so clear Boeing is using that it for Program accounting instead of the real cost. The difference to real cost is deferred cost. What you are telling is the complete opposite what would make any sense. I do not know why, maybe just because you are Boeing hate boy and saying Boeing is making profit is kind of freezing hell for you. The deferred cost on the 787 went far outside of any plan, it is actually the unplanned cost that lead to the unholy amount. Nobody at Boeing planed that it would need over 450 frames to break even on a single frame. 450 it did take for the 787 to get cash positive, that one produced frame did cost slightly less than it was sold for. What I call a real margin is when you count the real cost and sell it for a real price. That is not happening at Boeing. I know how program for cost accounting works. You plan an imagined production cost and as long as the production cost is above this imagined production cost you defer the difference. The deferred cost did build up over the first 450 frames and now about 500 frames on, 20 Billion two thirds of the deferred cost are still on the books. And Boeing has deferred production cost on the MAX and is starting to defer production cost on the 777-9. A huge amount of money that Boeing counts as profit, but has not yet earned.
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sciing
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Post by sciing on Feb 3, 2020 22:10:23 GMT 1
What are you talking about? Again „The program will break even long before deferred cost block is zero.“ There is a huge profit margin ASP and planned average cost. This is my point, I wonder what you are talking about? You said in one post the planned average cost is so high that the planned margin (not the real one) is low. Now you say that planned average cost are so low that the deferred cost block was becoming to big? Do you see the logical inconsistence in your argumentation? Of course the planned profit was set high, and that is the reason the planned average cost were set low. As you wrote the deferred cost are therefore huge! Again this huge profit has to be set in contrast to deferred cost and development to estimate program break even.
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mjoelnir
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Post by mjoelnir on Feb 4, 2020 10:33:32 GMT 1
What are you talking about? Again „The program will break even long before deferred cost block is zero.“ There is a huge profit margin ASP and planned average cost. This is my point, I wonder what you are talking about? You said in one post the planned average cost is so high that the planned margin (not the real one) is low. Now you say that planned average cost are so low that the deferred cost block was becoming to big? Do you see the logical inconsistence in your argumentation? Of course the planned profit was set high, and that is the reason the planned average cost were set low. As you wrote the deferred cost are therefore huge! Again this huge profit has to be set in contrast to deferred cost and development to estimate program break even. And the deferred cost are still huge. 20 billion USD that Boeing has claimed as margin and profit, but have not yet been earned. I am wondering what you are thinking about. Are you swallowing Boeing's propaganda hook, line and sinker? How can anybody talk about margins when in reality you make a loss? You can of course imagine your margins as high as you want, when there is no constraint on them being real. Boeing defers cost. The only company to use program for cost accounting and they can only use this grandfathered accounting method, because they did use it before a certain cut of date and it only exists in the grotty US GAAP and even there no company having not used it in the past, is allowed to take it up today. Yes theoretical it should all even out in the end, but while you are doing it you show higher profits and margins than you have made in reality. Furthermore because the deferred cost are booked to inventory, you show higher assets than you have in reality. The number come first back to normal, when the deferred cost are gone. The example of the 787 shows us, that there are no limits how far Boeing is prepared to go in deferring cost, in the attempt to not need to show the losses when they are made. The problem is when somebody like you takes this numbers seriously, without calculating the effect that deferring the cost have.
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Post by addasih on Feb 4, 2020 13:29:56 GMT 1
Let’s stop this discussion please since I don’t believe any of our members is working at Boeing as an accountant.
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sciing
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Post by sciing on Feb 4, 2020 15:52:30 GMT 1
The problem is when somebody like you takes this numbers seriously, without calculating the effect that deferring the cost have. I wonder who you mean. It's not me. "profit has to be set in contrast to deferred cost and development to estimate program break even."
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sciing
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Post by sciing on Feb 4, 2020 15:55:04 GMT 1
Let’s stop this discussion please since I don’t believe any of our members is working at Boeing as an accountant. Strange comment regarding that it is about basic account. Does it mean nobody should talk about Airbus airplanes and we have to close the forum because nobody works at Airbus?
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Post by peter on Feb 4, 2020 16:29:17 GMT 1
Let’s stop this discussion please since I don’t believe any of our members is working at Boeing as an accountant. Strange comment regarding that it is about basic account. Does it mean nobody should talk about Airbus airplanes and we have to close the forum because nobody works at Airbus? Somehow I get this gut feeling that's not what addasih means......
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