Boeing Company (The)

thank you for standing by good day everyone and welcome to the boeing company's fourth quarter 2019 earnings conference call today's call is being recorded the management discussion and slide presentation plus the analyst question and answer session are being broadcast live over the internet as a reminder the instructions to question to ask a question have changed this quarter to ask a question on today's conference please press the digit 1 followed by the digit 0 on your touchtone phone. Again, it is 1-0 for questions. At this time, for opening remarks and introductions, I am turning the call over to Ms. Marita Sutaja, Vice President of Investor Relations for the Boeing Company. Ms. Sutaja, please go ahead.

Thank you, and good morning. Welcome to Boeing's fourth quarter 2019 earnings call. I'm Marita Staja, and with me today are David Calhoun, Boeing's President and Chief Executive Officer, and Greg Smith, Boeing's Chief Financial Officer and Executive Vice President of Enterprise Performance and Strategy. Dave will start with some opening comments and head it over to Greg to address the business environment and our financial results. After management comments, we will conduct a question and answer session. In fairness to others on the call, we ask that you please limit yourself to one question. As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at Boeing.com. Before we begin, I need to remind you that any projections, estimates, and goals we have included in our discussion today are likely to involve risk. which are detailed in our news release, in our various SEC filings, and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures. Now, I will turn over the call to Dave Calhoun.

Thank you, Marita. Good morning to everyone. I'll state the obvious. I've been here two and a half weeks, and this is my first Bernie's call as the president and CEO of the company. While I'm new to the CEO role, I am certainly not new to the company and have long admired the business, the products that we build, and the people that serve the company. It's a very challenging moment for Boeing. We've got a lot of work to do, but I'm confident that we'll manage this situation in the right way, and I'm optimistic about the company's future, both in terms of the markets that we serve and maybe more importantly, the engineering and technical capabilities we bring. Before we proceed, let me just say to the families and the loved ones of those who perished in the Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents, we, I, am truly and deeply sorry for your loss. I will repeat this many, many times in the years ahead. Their memories will drive me personally to do everything I can to make our airplanes and our industry safer, and I know I speak for all of my Boeing associates accordingly. I've been spending a lot of my first week's meeting connecting with, listening to my Boeing teammates across the country. What I'm seeing and hearing is that our employees are incredibly proud to work at Boeing. but they're also hurt, and our employees are incredibly proud to work at Boeing, but they're also hurt and disappointed that we've let our stakeholders down. Together, we're committed to getting back on our front foot, learning with humility, and building on the powerful legacy that they and their predecessors have created over the last century. This includes engaging with one another and our stakeholders with greater transparency, holding ourselves accountable to the highest standards of safety and quality, and incorporating an outside-in perspective on what we do and how we do it. To that end, I've also been reaching out to important external stakeholders. I know you know that, including our customers of our three businesses, our supply base, our supply chain, which is under stress, business partners, and finally, maybe most importantly, regulators. I look forward to engaging with many others with whom I have not yet had the opportunity to meet with in the weeks and months to come. All of these conversations that I have had and I am certain the ones I will have are laced with support for our company, the important work that we do, and the importance of what we do for the country. We will be transparent in everything that we do as we move forward. I want to express my personal thanks to everyone who has been our partner in this journey. We're mindful that these are challenging times for many, and we remain grateful for your support. Before going through my initial priorities for 2020, let me share a brief history of my interactions with Boeing. I've known Boeing since the year 2000 when I started with GE's aircraft engine business, and we were engaged in the development of a new centerline engine for the long-range 777, capable of delivering 115,000 pounds of thrust to the airframe. That was the first of its kind. When you're on the wing, you are on the team. Given this history, the 777X first flight on Saturday not only was a major milestone and a proud moment for the company, but also has a significant meaning for me. I've watched the development of the 777 series from the very first engine to the new wingtip on the 777X and see it as a proof point of Boeing's engineering and technology prowess. Shortly after leaving GE, I returned to Boeing when Jim McNerney invited me to join the board in 2009. As a board member of Boeing with institutional knowledge of the business, I was able to develop my initial priorities right away in my first week. We can turn to the second slide, please. First and foremost, our primary focus continues to be returning the 737 MAX to service safely. This includes following the lead of our regulators and working with them to ensure they're satisfied completely with the airplane and our work. The FAA and the global regulatory authorities will determine the timeline for certification and return to service and we remain fully committed to supporting this process. Our job is to ensure that every requirement is fulfilled, every question from the regulators answered. We'll get it done, and we'll get it done the right way. As you well know, over the last year, the entire Boeing board has been actively engaged in helping to resolve our current challenges and enhancing our governance and safety oversight. These actions included establishing a board safety committee, and realigning and elevating the safety management and engineering organizations across the company. These organization design changes will shine bright lights on the safety process and the engineering disciplines that underlie them. As previously announced, we've also decided to temporarily suspend the 737 production beginning this month. We believe this decision is least disruptive to maintaining long-term production system and supply chain health. We will work closely with our supply chain to ensure we are ready to safely and smartly return to production. Similarly, public customer and stakeholder confidence in the 737 MAX is critically important to us, and with that focus, we've decided to recommend simulator training combined with computer-based training for all pilots prior to return to service. Our singular priority is safety, and every decision, every action, every step we take as we move forward will be guided by it. As we mentioned last week, we're currently estimating that the ungrounding of the 737 MAX will begin mid-2020. This estimate is informed by our experience to date with the certification process. It is subject to our ongoing attempts to address known schedule risks and further developments that may arise in connection with this certification process. It also accounts for the rigorous scrutiny that regulatory authorities are rightly applying at every step of their review of the 737 MAXIS flight control system and the Joint Operations Evaluation Board process, which determines pilot training requirements. It's important to emphasize that this estimate should not be interpreted as an attempt to influence or interfere with the FAA and other regulators' absolute authority to determine the timing and conditions of return to service. Very simply, accurate financial reporting requires that we provide our latest and most informed schedule. Similarly, our supply chain, in the name of transparency, requires a schedule to perform up to its standard. Moving on to rebuilding trust, which I briefly touched on earlier. We recognize that many of our stakeholders are rightly disappointed in us, and it's our job to repair these vital relationships. We'll do so through a commitment to transparency in everything we do and by meeting or exceeding expectations. We will listen, we will seek feedback, and respond appropriately, urgently, and respectfully. Our culture is centered around strong shared values, safety, quality, and integrity. Every day we will recommit to these and foster an inclusive environment that embraces oversight and accountability and puts these three core principles above all else. We will listen and resolve real-time any all employee concerns pertaining to safety or other of our shared values. We will also focus on operating with excellence. We must get back to basics, delivering safe products and services to our customers while continuously improving our quality. We will complete our work in station, wherever we are and whatever we do, and we will do it to the highest standards. We are committed to do it across our commercial defense space and security and services businesses. This is not relegated to just the MAX or the 737. This requires a focused approach and simplification in everything we do to ensure we deliver on what matters most with accountability. We will restore production health, both within the Boeing's four walls and the industry at large. We'll keep taking steps to manage our supply chain health and maintain workforce expertise across the enterprise. so that in particular, with respect to the 737 MAX, we'll be ready to restart production, increase rate safely, smartly, disciplined, and with the highest standards of quality. While doing all of these, we will not lose sight of the importance of investing in our future. Our markets are growing. Customer demand is evolving. The competition is increasing. Technology is advancing at a pace we've never seen before. Boeing must keep innovating to succeed. We'll continue to invest in our global workforce and new processes, new technologies that will help us become safer, more efficient as we define the future of aerospace. This work includes preparing for the first Starliner crewed mission, continuing to progress the 777X and the 737 MAX 10, and further growth of our global services business and full implementation of our Embraer partnership. That said, there are always some investment reprioritizing and streamlining that we can do, and we will. We'll take the time to reassess our product development strategy in a fairly methodical way. I think that's a natural course for any new incoming leader to take. We'll return to this topic in future discussions. This is not intended to delay, simply to refresh. By focusing on these priorities, and unleashing our talent, I'm confident we have the right foundation to keep the business strong, to keep it healthy while navigating this very difficult moment. Before I turn it over to Greg for an update on the business environment and our performance, I want to pause and thank him for the leadership he has provided throughout this challenging time and for so ably filling the CEO role during the transition. Everybody here knows we've had a number of leadership changes over the past few months, including me. Everybody here knows we've had a number of leadership changes over the past few months, including me. The strong teams we have supporting our leaders have provided the stability we need and paved the way for seamless transitions. But Greg has set in motion some of the changes we need to see, and he has led it with real skill. He will continue to be my partner, and we will lead the company together. I'm excited now to be working alongside him and the rest of our senior leaders. And now I'll turn it over to Greg.