The continuing delay in a potential huge aircraft order from Saudi Arabia may force the Boeing Co. to cut production even more than planned.
Financing problems are being blamed for the delay in the order to buy as many as a dozen Boeing 747s included in a package worth perhaps $6 billion to Boeing and McDonnell Douglas.Speculation is that Boeing, already planning to trim production of its lucrative 747s, may have to cut even deeper. Boeing had planned to cut production from three jets per month to two in January.
Analysts now say production could drop to 1.5 per month. That could lead to more layoffs on top of the thousands of jobs already cut by Boeing. The jets sell for about $150 million each.
President Clinton announced the promised Saudi order more than a year ago, but the Saudi government is facing drastic budget cuts and lacks enough money to pay for the aircraft. There is speculation that the Saudis would like the manufacturers to help finance the purchases, but Boeing and Douglas have their own cash-flow problems.
"Boeing is on the horns of a dilemma," said Wolfgang Demisch, an aerospace analyst with BT Securities in New York. "We can see a recovery drawing closer, but there's risk in the next 18 months. Boeing may have to cut more just when it should be gearing up for increased production."
Mr. Demisch said Boeing wouldn't want to lose any more of its experienced work force when it is anticipating a surge of orders in a couple of years to replace aging jets and to handle growth in air travel.