Boeing Is 'Delinquent' on Payments, Says Supplier Rockwell Collins
July 25 2016 - 8:20PM
Dow Jones News
By Jon Ostrower
In a rare public dustup between two of the biggest collaborators
in the aerospace industry, a major supplier to Boeing Co. said the
world's largest plane maker was behind on tens of millions dollars
in payments due at the end of last month.
"Boeing is delinquent and Boeing has contributed to some of our
underperformance here this quarter in cash flow, which is
disappointing, but we're working that with them," said Kelly
Ortberg, chief executive of Rockwell Collins Inc., during a call
discussing the company's third-quarter results Monday.
Rockwell's chief financial officer, Patrick Allen, said Boeing
owes the aerospace electronics company $30 million to $40 million
that was due in the quarter ended June 30.
A Boeing spokeswoman said in a statement that the aerospace
giant is "in the process of adjusting the payment terms of
suppliers." Boeing is changing the frequency with which it pays its
bills to suppliers to align with what it describes as industry
norms.
The spokeswoman said the company "adheres to all signed
contracts with its suppliers."
Boeing has long had the reputation among suppliers as having the
most efficient and timely payment, according to industry officials.
And Boeing's cash flow is among the most important metrics watched
by analysts and investors.
"That's abnormal to history," said Mr. Ortberg. "I hope it's
just a blip."
Rockwell supplies Boeing with cockpit displays and other
electronics, and the relationship between Boeing, the world's
biggest plane maker, and Rockwell, a major supplier, is widely held
up as a model for cost-reduction collaboration by both
companies.
As part of that collaboration, Rockwell has steadily increased
the amount of electronics it supplies on all of Boeing's latest
jetliners and some fighter jets in exchange for bulk discounts for
the parts it supplies to the plane maker.
Boeing historically has paid its contracts at a 30-day
frequency. Boeing declines to say what changes it is making to its
payment terms, but industry officials say it is adjusting to 60, 90
or even 120 days, with many of its suppliers.
"It's not really a contractual issue. It's just they haven't
paid us," said Mr. Allen.
Rockwell as part of its quarterly results lowered its cash flow
and revenue projection for the year, anticipating $5.3 billion in
revenue and $750 million in cash flow from operations for the full
year. That compared to its earlier $5.3 billion to 5.4 billion and
$750 million to $800 million guidance, respectively, driven
primarily by weakening business jet production.
Write to Jon Ostrower at jon.ostrower@wsj.com
(END) Dow Jones Newswires
July 25, 2016 20:05 ET (00:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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