Boeing said Tuesday it expects to record a charge of $1 billion in the third quarter due to higher costs in its 747-8 program and difficult market conditions.
Last year, the company said it was delaying deliveries of the 747-8 freighter and passenger jets due to design changes, limited engineering resources and a strike that shut down the company's commercial jet factories for eight weeks.
About $640 million of the charge reflects higher estimated costs to produce 747-8 airplanes at Boeing and its suppliers, Boeing said. Higher fixed expenses and volume-based penalties to suppliers are the main drivers of the additional costs, Boeing said.
The company said the remaining $360 million of the charge relates to "challenging market conditions" and its decision to maintain the 747-8 production rate at 1.5 airplanes per month nearly two years longer than previously planned. The company is delaying an increase in 747-8 production to two per month.
Boeing also said it expects the first flight of the 747-8 Freighter by early next year. First delivery of the 747-8 Freighter is expected in the fourth quarter of 2010.
Boeing said it will update its 2009 financial guidance on Oct. 21 when it reports third-quarter results.
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