Boeing Throws Incentives at Workers to Fix 787 Bottleneck

Boeing had an excellent 2013, but bottlenecks in its accelerated Dreamliner production could hold profitability back slightly in 2014.

Feb 21, 2014 at 3:00PM

The Dow Jones Industrial Average (DJINDICES:^DJI) was trading flat by midafternoon after existing-home sales dropped a larger than expected 5.1% in January from December. The National Association of Realtors blamed the decline on higher mortgage rates, poor weather, and lower inventory levels. As the markets try to finish he week off on a positive note, here are some companies making headlines today.


Boeing's first 787 to roll out at accelerated production rate. Source: Boeing.

Inside the Dow, Boeing (NYSE:BA) is pulling out all the stops to help its plant in North Charleston, S.C., keep up during a ramp-up of 787 Dreamliner production. The plant had previously been unable to keep up with the higher pace of 10 airplanes per month and was sending additional work orders to Boeing's Everett, Wash., plant.

Now the airplane manufacturer is offering a one-time bonus of 8% of a year's pay to workers at the North Charleston plant if the production problems can be fixed over the next few months. Managers are reorganizing a multitude of jobs involved in the mid-fuselage assembly where the production bottleneck originates

In addition to the bonus pay to drive incentive to fix the issue, Boeing has also hired 1,100 skilled contractors in the past three months to help spur increased production. One of the most important factors for Boeing investors in 2014 will be the successful execution of accelerated production rates. That will enable the company to become more profitable as economies of scale are improved, as well as to cash in its record high $441 billion backlog of orders. That said, Boeing's 787 program will continue to weigh down earnings until bottlenecks are fixed and production improves -- it may be 2016 until the program turns a profit for the company. 

Outside the Dow, Honda's (NYSE:HMC) Accord has officially beat out Toyota's (NYSE:TM) Camry in terms of sales to individual customers. The Camry still sits atop the ranks for overall sales, but the Accord comes out ahead when only considering retail sales to individual car buyers and excluding sales to fleets.

Camry's retail sales to customers accounted for 342,000 sales out of its total 408,484 sales in 2013. Honda's strategy has been to focus on more profitable retail sales and leads the Camry in that category. Honda's retail sales accounted for 360,000 of its total 366,678 units.

"Our focus on retail sales to individual buyers has a direct correlation to the high resale value of Honda products," John Mendel, Honda's U.S. executive vice president, said in a statement, according to Automotive News.

Meanwhile, the Japanese automaker that is third in U.S. sales is forecasting a rise in profit after trailing its rivals last year. While Toyota and Honda took advantage of a weaker yen and enjoyed a dramatic surge in profits, because each dollar was more valuable when translated into the Japanese currency, Nissan opted to increase incentives on its vehicles in an effort to accelerate sales. That looks to change this year.

"You can bet on the fact that 2014 is going to see an improvement compared to 2013," Automotive News quoted Nissan CEO Carlos Ghosn as saying. That's good news for investors of domestic automakers such as Ford and General Motors. The last thing domestic auto investors want to see is a weakened yen that enables Japanese automakers to initiate a price war that would make it impossible for Detroit automakers to match and remain profitable.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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