Top executives at Boeing Co announced a new ambitious, five-year strategy to investors and analysts which is said would secure the manufacturers future for the next 100 years through improvements in efficiency, returning capital to shareholders and growth in its after-market services/parts division.
Following the announcement board members did face criticism of whether it would be possible for the company to overcome the cyclical commercial aircraft business.
At the conference where the announcement was made, Boeing Chief Executive Dennis Muilenburg said the group plans to boost profit margins to double-digit percentages during the next year whilst also having an “aspirational target … toward the end of the decade of getting to mid-teen margins.”
The company is changing its strategy to allow it to become more efficient and flexible through the use of automation and 3-D printing when manufacturing its jetliners. Muilenburg said that the changes would help Boeing create a more sustainable business instead of what is usually highly cyclical.
Muilenburg added that Boeing is not only focused on becoming a “global industrial champion” but “the industry leader in cash generation”.
Boeing did state that 777 jetliner production would see a drop to around 5.5 a month towards the end of 2018 and 2019, as expected by some analysts’ predictions, as the company moves its focus onto its successor, the 777X jet. At current the production rate is 8.3 per month which will drop to 7 per month in 2017. Muilenburg said that the changes have been factored into Boeing’s cash and profit margin forecasts.
Boeing displayed its plan to pay back nearly $30 billion in outstanding deferred costs from the 787, which it indicated 70 percent would be derived from selling larger, more profitable versions of the plane at higher prices.
Analysts did raise concerns over whether Boeing could over produce if there becomes a downturn in the aerospace industry. Currently orders for new planes have dropped and by 2020 Boeing is estimating production to be at 900 planes per year.
The head of Boeing’s commercial plane unit, Ray Conner, said that the groups manufacturing must be flexible and observant of the market however he said “particularly on the single aisles, where we have taken the rates really high, we are feeling pretty strong about that.”