Boeing Down Slightly on Restructuring Plan
Shares of Boeing (NYSE: BA) finished down around 2 percent on Wednesday after the company announced a restructuring initiative to its Defense, Space and Security unit. The purpose of the plan is to cut costs as the defense industry is expected to face "extreme funding pressure" on looming budget cuts.
The re-election of Barack Obama all but assures that steep defense cuts will be on the table as the government attempts to address the fiscal cliff. If Mitt Romney had been elected, there is a chance that defense cuts would have been less severe or non-existant.
The company said that it has rotated the positions of some of its executives in the Defense division and that by the end of 2012 it expects to have 30 percent fewer executive positions than in 2010. Reports indicate that Boeing is also planning on closing some of its facilities in California.
Boeing said that the restructuring is designed to reduce costs, bolster its competitive position and enable future growth. Since 2010, Boeing has already achieved $2.2 billion in savings as a result of cutting overhead costs, improving efficiencies in its supply chain, and rationalizing facilities space.
Looking ahead, the company believes that the initiative will allow it to invest in growth opportunities like the Phantom Eye hydrogen-powered unmanned airborne system, the 702SP satellite, Maritime Surveillance Aircraft, and international product expansion.
Dennis Muilenburg, chief executive of Boeing defense unit, said, "We are at one of the most challenging yet opportunity-rich times in our history. While funding for the U.S. Department of Defense is under extreme pressure, we're innovating and expanding our core, in the U.S. and around the globe, to sustain and grow our business."
Year-to-date, the stock has struggled, losing a little more than 4 percent. This is significantly below the return of the S&P 500 as Boeing has been effected by delays and cost overruns related to the Dreamliner aircraft and concerns over defense budget cuts.
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.