philidor
in service - 6 years
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Post by philidor on Oct 28, 2019 9:28:33 GMT 1
Well, you could alternatively reach the opposite conclusion. - The CSeries almost bankrupted Bombardier, which had to be bailed out by Quebec. The financial and commercial failure of the programme shows that a huge investment to secure a small competitive advantage is an unsound strategy when your competitor can launch a quick and comparatively cheap update of an existing aircraft. - Before beeing a success, the 787 was a terrible drain on Boeing's ressources ; it was several years late and tenths of billion dollars over budget, but Boeing was saved by its very strong financial footing : the programme was turned around. - While Boeing was working on a clean-sheet 737 successor, Airbus launched the A320neo. Most Boeing's customers then made it clear they weren't waiting for a Boeing brand new (and expensive) design, they had rather buy the cheap and quickly re-engined Airbus A320neo. Boeing had no choice ! Now, if you look at the question from the security angle, why would a new design be a less risky undertaking than the improvement of an old one ? You never know what happens : in its early days, the 787 came close to a catastrophic fire ... Boeing has spent nearly 55 billion USD on share buy backs during the years. IMO that is a strange way to use cash in a technological field, where you need huge amounts of it while developing the next generations of product. Without this strange behavior, Boeing would have huge amounts of equity and own cash, while being free from the need to lend money somewhere. At least it would have been enough to finance one or two extra clean sheet developments, without breaking out in sweat. I agree that Boeing's financial strategy of reducing equity to increase the rate of return on equity went too far and carried a lot of risk. Listed companies, however, cannot pile up cash without being pressed by the market to return it to investors - it's a matter of balance. I expect Boeing to adapt its policies soon. |
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Post by kevin5345179 on Oct 30, 2019 17:29:58 GMT 1
funny
so no bonus for everyone and CEO doesn't take pay cut lol
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mjoelnir
in service - 2 years
Posts: 4,089
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Post by mjoelnir on Oct 30, 2019 20:00:36 GMT 1
Boeing has spent nearly 55 billion USD on share buy backs during the years. IMO that is a strange way to use cash in a technological field, where you need huge amounts of it while developing the next generations of product. Without this strange behavior, Boeing would have huge amounts of equity and own cash, while being free from the need to lend money somewhere. At least it would have been enough to finance one or two extra clean sheet developments, without breaking out in sweat. I agree that Boeing's financial strategy of reducing equity to increase the rate of return on equity went too far and carried a lot of risk. Listed companies, however, cannot pile up cash without being pressed by the market to return it to investors - it's a matter of balance. I expect Boeing to adapt its policies soon. You have companies that do exactly that, have a big equity and use own cash instead of using other peoples cash. If you have zero equity you do not own yourself even part of your cash. Boeing does two policies to increase cash, that can be rather costly - take a lot of cash in advances and progress billing, that leads to have to offer lower prices. - keep a lot of cash back by contracting for late payments to suppliers, that again usually does raise your cost. |
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Post by addasih on Oct 31, 2019 12:14:18 GMT 1
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philidor
in service - 6 years
Posts: 8,950
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Post by philidor on Oct 31, 2019 13:40:24 GMT 1
You have companies that do exactly that, have a big equity and use own cash instead of using other peoples cash. If you have zero equity you do not own yourself even part of your cash. Boeing does two policies to increase cash, that can be rather costly - take a lot of cash in advances and progress billing, that leads to have to offer lower prices. - keep a lot of cash back by contracting for late payments to suppliers, that again usually does raise your cost. Some public companies keep a lot of cash, not necessarily equity. Anyhow, when a company keeps huge financial reserves, the market usually pushes to get the money back, whether through special dividends or share buy-back. Investors eventually win out because there is no reason to over-fund a company. Boeing is the reverse case : an under-funded company trying to boost its share price - sometimes a myopic approach. I expect the management to be more cautious in the near future. |
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philidor
in service - 6 years
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Post by philidor on Oct 31, 2019 13:47:27 GMT 1
The usual practice of lumping together unrelated issues for grandstanding purposes !  Instead of delving into complex technical issues, let me widen the debate and seize the opportunity to make rewarding general statements that my electorate back home will understand better ... |
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mjoelnir
in service - 2 years
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Post by mjoelnir on Oct 31, 2019 14:33:47 GMT 1
You have companies that do exactly that, have a big equity and use own cash instead of using other peoples cash. If you have zero equity you do not own yourself even part of your cash. Boeing does two policies to increase cash, that can be rather costly - take a lot of cash in advances and progress billing, that leads to have to offer lower prices. - keep a lot of cash back by contracting for late payments to suppliers, that again usually does raise your cost. Some public companies keep a lot of cash, not necessarily equity. Anyhow, when a company keeps huge financial reserves, the market usually pushes to get the money back, whether through special dividends or share buy-back. Investors eventually win out because there is no reason to over-fund a company. Boeing is the reverse case : an under-funded company trying to boost its share price - sometimes a myopic approach. I expect the management to be more cautious in the near future. It matters where the cash in a company comes from. Going with a company to below zero equity, spells in some countries (by law) the strait way to have to go to the bankruptcy court, because below zero equity means you assets do not cover your liabilities, with other words you own less than you owe. If you look at Boeing, than you have to add that the deferred costs are booked as inventories, that means assets. That would mean, that if Boeing would have to account to IFRS, that do not allow to book cost to inventory, Boeing would have to show being billions below zero equity. Boeing would have to show having billions more liabilities than assets. The program for cost accounting is, as so much else at Boeing, grandfathered. No company having not accounted this way before a certain date is allowed to take it up. Yes equity does not equals cash. That is why you make an statement (calculation) of financial positions, giving you equity and you make a statements of cash flows, showing you cash coming in, flowing out and cash reserves. The difference is between owning your cash, you need equity to do that, and lending your cash, not equity or minus equity shows that all your cash is on loan, be it from the banks, suppliers or customers. Owned cash is save, cash on loan can be called in difficult times. |
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philidor
in service - 6 years
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Post by philidor on Oct 31, 2019 14:42:01 GMT 1
The above are among the reasons why I characterised Boeing as an under-funded company.
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mjoelnir
in service - 2 years
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Post by mjoelnir on Oct 31, 2019 16:36:26 GMT 1
The above are among the reasons why I characterised Boeing as an under-funded company. something we agree upon |
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s543
in service - 2 years
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Post by s543 on Nov 1, 2019 11:39:57 GMT 1
The whole think is very very simple - and is nicely but in length said in the mentioned Forbes article....
Boeing stopped listening to engineers and started to listen and be run by the "financial wizards".
They spent i.e. "thrown away" horrendous amounts of money out the window instead of making new decent product to make money and to improve the technology. As simple as that. They were cutting all available corners where ever you look.
They have attitude to innovations the same the state owned companies had during communist era. Produce without a single change as long as possible and DO NOT INNOVATE - it is a bother. Do it only when absolutely necessary.
What did happen to them is JUST - and I am sure much more must and will happen !
Not only the airlines but others involved will not swallow the BO behavior and will go to courts and they will win those ! Also I do believe that the Government will in time step in and will most probably do something - we know those move extremely slow and are well corrupted-influenced-lobbied by BO (as was proven repeatedly) but eventually they might do something.
They still do prove to everyone that nothing has changed - the "Wall street" and "lawyers" culture is prevalent and dominant. We can still see it in every announcement - the way they treat their customers, the way they handle the victims and the way they handle the communication. They tell to everyone: " We are shameless ** who cares only about our own money".
We do well know that those mentioned DO NOT PRODUCE ANY REAL VALUE - they only operate on the real world efforts of other parts of the society - They are of course very needed and the society can not exist without them but the question is how much influence on technical matters they should have ?
So we will see what will happen next.
P.S.
There is now very looooooong discussion on the theme on Leeham and is not very optimistic - even if most of the discussing are Americans.
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Instead of delving into complex technical issues, let me widen the debate and seize the opportunity to make rewarding general statements that my electorate back home will understand better ...