Cash Flow Issue
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Cash flow is the stamina of any operation without which the business will cease to exist. The Boeing Company and its suppliers are all facing very similar issues as Lawrence Sports. A restrain on cash flow due to supply chain setbacks; a shortage of key components from subcontractors is the focus of this problem. “Problems with software coding, documentation and a shortage of tiny fasteners needed to hold the aircraft together were the main reasons for the delays, executives said” (Jelter, 2007, para. 7).
Due to these set backs “Shares in Boeing sold off sharply after the announcement” (Jelter, 2007, para. 4). Boeing suppliers Spirit Aerosystems Inc (Spirit), Alcoa Inc., and Honeywell International Inc. just to mention s few are all suffering because the suppliers “…does not receive payment for 787 sections it has delivered until after the 787 is certified” (McMillin, 2008, para. 1).
Cash flow will become an issue for supplies like Spirit, “With the additional 787 delay, S&P said Spirit needs additional capital. At the end of September, Spirits cash balance totaled $105 million. It also had a $400 million revolving line of credit” (McMillin, 2008, para. 2).
“Boeings delays will not have a material impact on Spirits 2007 earnings, the company said this week” (McMillin, 2008, para. 6). Spirit stock price has increased despite all the negative publicity. Using bank loans to float the operations, is one way Spirit is getting by.
Spirit is gambling on the future outcome of this project, the potential orders from Boeing will have an exceedingly lucrative outcome on Spirit statement of cash flow in the near future. If Spirit can survive this situation it will reap the benefits of the Boeing 787 Dreamliner. “The 787 program has been a huge boost to Boeings order books, with airlines already signing up for 710 of the ultra-modern midsized, twin-engine aircraft, making it the most successful commercial aircraft launch ever” (Jelter, 2007, para. 4). Similarly