The Five Dumbest Things on Wall Street This Week: Jan. 18
5. Boeing's Bad Dream
Just when Boeing's(BA) brass finally thought they could sleep at night, the company's recurring Dreamliner nightmare once again turns the heavenly skies into their own version of Elm Street.
Heck, even Freddy Krueger must be tired of Boeing's media bloodbath by now -- and he haunted kids' dreams in nine movies!
Regulators around the globe grounded the Dreamliner for safety checks Wednesday after one of All Nippon Airways (ALNPY) fleet was forced to make an emergency landing. This problem in this latest case was a cockpit message showing battery problems along with a burning smell that was detected in the cabin.
Forget the unpleasant odor of airline food -- sniffing a burning battery 35,000 feet above Tokyo must really turn your stomach.
The grounding comes only two days after Japan's transport ministry announced its plan to investigate two fuel leaks that popped up on a Dreamliner in Boston owned by Japan Airlines . For the record, the Dreamliner is not just big in Japan, but huge, with Japanese airlines accounting for nearly half of the 50 planes currently in service.
Prior to this latest move, Japanese regulators, along with their counterparts at the U.S. Federal Aviation Administration , seemed dead-set on keeping the $207 million plane in the air as they studied its nagging problems. For example, Transportation Secretary Ray LaHood sounded more like a cheerleader than a regulator last Friday when he told reporters he had "absolutely no reservations about boarding one of these planes and taking a flight."
Sorry, Ray, but that type of tough talk is not going to fly anymore. With safety concerns being splattered all over the headlines, old Freddy himself would lose sleep before boarding a Dreamliner at this point.
The steadfast reassurance by government officials like LaHood also kept Boeing's shares flat in the past few weeks, when by all rights they should have been nose-diving on the steady stream of bad news. That's changed as well. Goldman Sachs acknowledged the crisis of confidence Wednesday by yanking Boeing from its conviction-buy list and cutting its price target on the company to $90 from $98 a share. Boeing stock fell almost 4% on the day.
Responding to the FAA decision, Boeing CEO Jim McNerney said in a statement: "The company is working around the clock with its customers and the various regulatory and investigative authorities. ... We are confident the 787 is safe and we stand behind its overall integrity."
Thanks, Jim, but standing behind it is not the problem. Flying inside it is.
Meanwhile, even as Boeing is suffering a death by a thousand tiny cuts from its Dreamliner woes, the company will soon be featured in another slasher movie. Almost 40% of Boeing's sales come from its defense business, which could be hard hit if the upcoming debt-ceiling battle turns bloody.