The speaker, Cai von Rumohr, introduces Brian West, the CFO of The Boeing Company. West apologizes for the recent accident involving Alaska Airlines and assures that they are cooperating with all stakeholders. He also mentions that they had earnings 2 weeks ago and doesn't have much new information to report. When asked about the FAA's tighter oversight, West acknowledges their accountability and welcomes the increased scrutiny. He also mentions that they are working on strengthening quality and respecting the slower production rate to ensure safety.

The first half output for Boeing will be lower due to their focus on keeping planes in position longer to incorporate learnings. In the second half, they expect to reach 38 planes per month, but the regulator will dictate the rate. There are 26 inspectors focused on the MAX and an audit plan in progress. The line has been paused to implement inspection protocols, and output will be lower in the first half but will increase towards 38 in the second half. The exact rate during the first half is uncertain.

Brian West and Cai von Rumohr discuss the timeline for fixing the engine anti-icing issue on the Boeing 737 MAX. West explains that they are applying resources and engineering to solve the problem, but it will still take between 9-12 months to complete all the necessary testing and protocols. They are working diligently and the certification process is moving forward for the 7 and 10 models.

Boeing is close to finishing the analysis and documentation required for the anti-icing solution on the 7 model and is making progress on the flight test plan for the -10 model. They have 3 different teams working on certification for the 7, 10, and anti-icing, and as long as resources are applied, they expect these models to be certified. They will be held to a rate of 38 per month in the second half of the year, which will allow them to focus on supply chain issues and strengthen quality. They will continue to work on operational improvements and keep the master schedule ahead of final assembly.

The company plans to maintain a steady supply chain and hold supplier build rates steady to avoid instability and improve quality. They are willing to hold more inventory and see it as a good investment. The decrease in out-of-station work will not only lead to better productivity but also improve quality. The company's focus is on improving quality and reducing traveled work to achieve this.

The speaker discusses the importance of stabilizing the supply chain in order to eliminate travel work and ensure that mechanics have the necessary parts and tools to work on airplanes. They mention improvements in this area and plan to take advantage of the slower pace to make further improvements. The speaker also mentions that retention and offer acceptance rates are high, indicating that people still want to work at Boeing and have fulfilling careers. They also mention the success of the shadow factories in delivering 50 MAXs in the fourth quarter, leading to potential increases in delivery rates in 2024.

The speaker discusses the production rate of 10 airplanes per month at the shadow factories, with a recent spike due to an issue with Spirit. They expect to have 140 airplanes from before 2023 out of inventory by the end of the year. The FAA's involvement will not affect production, and they need to ensure that China and India continue to take the airplanes. There are currently 25 airplanes in inventory that still need work due to disruptions in the past year.

Boeing expects to deliver parts for the MAX planes this year and shut down their shadow factory for the 87 model. They have 50 planes that need rework but expect to finish it this year. The delay in certification for the MAX 7 and 10 models may affect the delivery schedule for 2024 and early 2025, but the company is confident in their ability to adjust their production plans to meet customer demand. They have 35 -7 and -10 models in inventory and expect to build 10-15 more on the line. The company does not anticipate significant disruptions and will continue to monitor certification milestones.

During an investor day, Cai von Rumohr asked Brian West about the amount of man-hours it takes to build a plane out of inventory compared to final assembly. West confirmed that it takes more hours in the shadow factory, but once the inventory is liquidated and the shadow factories are shut down, experienced labor can be redirected to new production. West also mentioned that the company has been steadily hiring and training employees, which will prepare them for an increase in production rates in the future.

The speaker believes that their company will be in a better position in the future due to their current strategies. They expect the cash margins for their 87 and 37 programs to be stable in the long term, with potential for improvement due to model mix. The speaker also mentions the importance of executing their plans and leveraging the shutdown of shadow factories. The IAM labor contract at BCA is set to expire in September and covers less than 15% of the cost of an airplane, with the majority of costs being parts. Negotiations for a new contract will focus on touch labor, support labor, and engineering resources.

Brian West discusses the various pieces involved in the IAM negotiations and the impact of recent events on the relationship between Boeing and its employees. He also mentions that BDS is facing losses in the fourth quarter but expects to reach high single-digit margins by 2025 or 2026.

The speaker explains that the company's goal is to achieve high single digit margins, which is closer to double digits when factoring in the margins from the service business. The team is working on improving margins, particularly in the areas of fighters and satellites, where supply chain and labor issues have impacted profits. The company is also working to derisk fixed-price development programs, including the tanker, T-7, and MQ-25, in order to fulfill customer requirements and deliver high-quality products. Despite some challenges, the speaker is confident in the company's ability to meet customer needs and achieve their goals.

Boeing expects more stability in their fixed-price development programs and plans to focus on derisking and delivering. They have confidence in their team and plan for the presidential aircraft program and are applying more engineering resources to it. They expect to fulfill requirements for the Commercial Crew program and then move on. Foreign sales were 20% of BDS last year and are expected to increase, potentially reaching 30% by 2025-2026.

The speaker discusses the potential for the company to reach historical levels of success over time and mentions positive developments in their defense portfolio, such as wins in Canada and Germany, increased investment in Australia, and potential international opportunities. They also mention that the first quarter of the year will likely see lower cash usage and volume due to seasonality and customer considerations, but it will be similar to the first quarter of the previous year when normalized for certain factors.

The speaker discusses how they have to normalize for customer considerations and the impact of the 737-9 grounding on the first quarter of 2023. They also mention the impact of focusing on BCA and holding higher inventory. The speaker then talks about the $10 billion cash flow target for 2025-2026 and how it may be affected by the shutdown of shadow factories and the performance of BDS and BGS.

Boeing believes that their plan to recover and stabilize their business will result in around $10 billion in profits. They are focused on executing this plan and believe they have the ability to do so. They will start paying cash taxes in 2023 and it will continue to be a cash drain for the next few years. The biggest risks and opportunities for their business depend on their ability to stabilize their factory and increase production volume at a pace approved by the FAA.

The speaker emphasizes the importance of not getting ahead of themselves and remaining focused on delivering on the supply side. They mention a strong backlog of orders and a resilient demand environment, with pent-up demand for fleet replacement and good underlying growth fundamentals. The speaker also mentions the current conditions with the FAA and expresses confidence in stabilizing and growing the supply chain. They acknowledge that last year's demand was unexpectedly high, but believe there is still potential for growth in the marketplace.

Cai von Rumohr expresses optimism for the future and thanks Brian West for their conversation.

This summary was generated with AI and may contain some inaccuracies.