(Bloomberg) -- Boeing Co. warned that deliveries of its cash-cow 737 jetliner will come in at the low end of its targeted range this year as a recently discovered supplier glitch crimps output.
Narrowbody handovers will be near the bottom of Boeing’s goal of shipping 400 to 450 of the popular 737 jets this year, Chief Financial Officer Brian West said at an investor conference on Thursday. Profit margins for the company’s commercial and defense units will be negative in the third quarter, he said.
The aviation titan disclosed last month that some holes in 737 bulkheads that help maintain cabin pressure were improperly drilled by supplier Spirit AeroSystems Holdings Inc. Boeing said then that the issue would cause some near-term delivery delays, and that it was evaluating the impact on the annual target even as it works to lift output.
Boeing is finding it takes longer to address the aft-pressure bulkhead issue than an earlier Spirit issue involving brackets used to attach the 737’s vertical fin to the main fuselage. Mechanics are inspecting and repairing hundreds of drilled holes per jet, he said.
“We have literal armies of people” working on this issue at Boeing and Spirit, West said.
Shares of Boeing slipped 0.2% as of 10 a.m. in New York. Spirit fell 1.8%.
West’s comments at the Jefferies conference provided the first detailed look at how Boeing is grappling with another manufacturing defect potentially dating back years.
The US planemaker delivered just 22 of its 737 jets in August and expects to ship 70 of the narrowbodies during the third quarter, West said.
Even with the latest setback, Boeing remains on track to generate between $3 billion and $5 billion in free cash flow this year, West said. The manufacturer’s mid-decade targets for cash, 737 and 787 Dreamliner production haven’t changed either, West said.
Still, cash flow will be slightly negative in the third quarter.
“We are squarely in middle off a recovery, West said. “Recoveries tend to be lumpy not linear.”
Read more: Boeing, Supplier Spirit Fall After New 737 Max Defect Found
(Updates with share movement, West comments from fourth paragraph)
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