Boeing’s write-off due to Starliner delays goes up to nearly $900 million
Capitalism in space: In a SEC filing on October 26, 2022, Boeing revealed that it has been required to spend another $195 million to cover the additional costs due to the further delays in getting Starliner launched, bringing the company’s total expense now to $883 million.
Boeing acknowledged today that it is taking a further $195 million charge against earnings for the CST-100 Starliner commercial crew program. Developed through a fixed-price contract with NASA, Starliner has encoutered a number of delays and Boeing must cover those costs. Added to $688 million already taken, the company now is spending $883 million of its own money on the program.
Boeing’s original fixed-price contract was for $4.2 billion, and included the test flights as well as six operational flights to ISS. However, numerous problems caused repeated delays and the need to fly a second unmanned test flight. Originally planned for the spring of 2020, the first manned Starliner flight is now targeting February 2023, three years behind schedule. Due to that delay, SpaceX’s Dragon ended up getting new contracts that included many of the later operational flights that Boeing would have earned. Right now, even if the capsule begins flying in ’23, NASA’s already purchased six flights will cover its needs through around ’26.
After that, NASA will still need to buy manned flights, if only to get to the new commercial space stations being built, and Starliner will then be an option. This just means however that it will take Boeing a long time to recover its Starliner losses. And that assumes customers begin to line up to buy flights.
On Christmas Eve 1968 three Americans became the first humans to visit another world. What they did to celebrate was unexpected and profound, and will be remembered throughout all human history. Genesis: the Story of Apollo 8, Robert Zimmerman's classic history of humanity's first journey to another world, tells that story, and it is now available as both an ebook and an audiobook, both with a foreword by Valerie Anders and a new introduction by Robert Zimmerman.
The ebook is available everywhere for $5.99 (before discount) at amazon, or direct from my ebook publisher, ebookit. If you buy it from ebookit you don't support the big tech companies and the author gets a bigger cut much sooner.
The audiobook is also available at all these vendors, and is also free with a 30-day trial membership to Audible.
"Not simply about one mission, [Genesis] is also the history of America's quest for the moon... Zimmerman has done a masterful job of tying disparate events together into a solid account of one of America's greatest human triumphs."--San Antonio Express-News
Capitalism in space: In a SEC filing on October 26, 2022, Boeing revealed that it has been required to spend another $195 million to cover the additional costs due to the further delays in getting Starliner launched, bringing the company’s total expense now to $883 million.
Boeing acknowledged today that it is taking a further $195 million charge against earnings for the CST-100 Starliner commercial crew program. Developed through a fixed-price contract with NASA, Starliner has encoutered a number of delays and Boeing must cover those costs. Added to $688 million already taken, the company now is spending $883 million of its own money on the program.
Boeing’s original fixed-price contract was for $4.2 billion, and included the test flights as well as six operational flights to ISS. However, numerous problems caused repeated delays and the need to fly a second unmanned test flight. Originally planned for the spring of 2020, the first manned Starliner flight is now targeting February 2023, three years behind schedule. Due to that delay, SpaceX’s Dragon ended up getting new contracts that included many of the later operational flights that Boeing would have earned. Right now, even if the capsule begins flying in ’23, NASA’s already purchased six flights will cover its needs through around ’26.
After that, NASA will still need to buy manned flights, if only to get to the new commercial space stations being built, and Starliner will then be an option. This just means however that it will take Boeing a long time to recover its Starliner losses. And that assumes customers begin to line up to buy flights.
On Christmas Eve 1968 three Americans became the first humans to visit another world. What they did to celebrate was unexpected and profound, and will be remembered throughout all human history. Genesis: the Story of Apollo 8, Robert Zimmerman's classic history of humanity's first journey to another world, tells that story, and it is now available as both an ebook and an audiobook, both with a foreword by Valerie Anders and a new introduction by Robert Zimmerman.
The ebook is available everywhere for $5.99 (before discount) at amazon, or direct from my ebook publisher, ebookit. If you buy it from ebookit you don't support the big tech companies and the author gets a bigger cut much sooner.
The audiobook is also available at all these vendors, and is also free with a 30-day trial membership to Audible.
"Not simply about one mission, [Genesis] is also the history of America's quest for the moon... Zimmerman has done a masterful job of tying disparate events together into a solid account of one of America's greatest human triumphs."--San Antonio Express-News
Boeing’s cost cutting measures:
“Boeing Outsourcing More U.S. Jobs to India While Making Billions From Taxpayer-Funded Defense Contracts
Hundreds more American jobs at Boeing are expected to be outsourced to India next year. The move comes as Boeing has laid off tens of thousands of employees and sent most of its high-paying American tech jobs to India.
While outsourcing American jobs, Boeing remains of the most well-connected corporations among Democrats and Republicans in Washington, DC.”
https://www.breitbart.com/politics/2022/10/14/boeing-outsourcing-more-u-s-jobs-to-india-while-making-billions-from-taxpayer-funded-defense-contracts/
Ah yes, the GE Jack Welch corporate suicide plan. Boeing appears to be an enthusiastic student.
I suspect Starship will be well-established before Starliner is in a position to compete for any commercial space station crew and cargo delivery business. Its day is passing before it can even arrive.
Note to self, if I ever negotiate a fixed price contract, have an out after I lose a billion dollars.
And Boeing is on the hook for six flights? Whoh.
The lesson here is: Don’t negotiate a fixed price contract unless you know you can deliver.
It puts all the risk on the contractor. There is no “out,” unless the government/customer decides you can’t deliver at all (let alone on time), at which point you may owe money back…
Ballonmann wrote: “The lesson here is: Don’t negotiate a fixed price contract unless you know you can deliver.”
Boeing undoubtedly bid much higher than they had expected to spend on this product, because they could not know what problems would develop. The hoped-for and expected profit should have been very high, considering the risks of cost overruns such as these. These charges to current earnings are costs to the company that exceed current income from the contract. Whether they have bid high enough to recover these costs later in the contract’s life is not well known outside the company, but as these costs cause the overall profit on this contract to diminish, maybe even vanish.
Boeing has been a fixed price corporation for decades, so they should have been able to price this out reasonably well, but something went terribly wrong.
Boeing has many decades of experience in space hardware, so they should have been expected to perform better than they did. Several people have pointed out that, with the merger with McDonnell-Douglass, the MD management took over Boeing, and the performance of the company shows that MD mismanagement has indeed taken over our once-proud leader in worldwide aerospace.
Presumably, SpaceX made a similarly high bid, and presumably they are being well rewarded for having a spacecraft that worked well the first time. Considering the alternative, SpaceX’s reward is well deserved.