| Boeing may be hit by 700m in charges { March 5 2004 } Original Source Link: (May no longer be active) http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381564474&p=1012571727088http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381564474&p=1012571727088
Boeing may be hit by $700m in charges By Elizabeth Rigby in Chicago Published: March 5 2004 19:22 | Last Updated: March 5 2004 19:22 Boeing has signalled that it may be forced to take pre-tax charges of about $700m in the coming year, relating to its controversial $18bn tanker deal and its 717 jetliner programme.
In its annual 10-K [report] filing to the US Securities and Exchange Commission, Boeing said it may take a pre-tax charge of up to $310m, if its deal to provide up to a 100 767 tankers to the US air force fails to materialise.
It also said it could take a further pre-tax charge of up to $400m if the company terminates its beleaguered 717 programme necause of "a lack of market demand".
Boeing said its order backlog for the 106-seat jetliner was dwindling, adding that it had lost a significant campaign to sell 717s to Air Canada at the end of last year.
However, Boeing on Friday downplayed the potential charges and said all it was doing was disclosing "more than remote" financial risks, in accordance with regulations.
"If a situation is 'probable', the company is expected to actually book the cost. In these two cases Boeing is disclosing, but not booking, the risk in the interests of full transparency," it said.
Boeing has been locked in controversy over plans to lease up to a 100, 767 tankers to the US air force since last year, when questions over the bidding process led to the dismissal of Mike Sears, Boeing's finance director, and Darleen Druyun, a Pentagon official later recruited by Boeing.
It suffered a further setback last month when Donald Rumsfeld, the US defence secretary, acknowledged that the deal might have been tainted by "wrongdoing" and announced a new Pentagon study that could delay the deal until May.
There are currently four separate Washington reviews linked to the deal.
"The potential [717] charge is towards the upper end of expectations," said Harry Breach, analyst at Bank of America.
"Boeing came near to closing the programme in late 2001 and it seems likely that its future will hang on its success in a couple of active and upcoming sales campaigns, including Lufthansa."
Boeing also said on Friday that it was considering a $1bn contribution to its pension plan during the first quarter of 2004.
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