Northrop Grumman is taking a pre-tax charge of $125 million in the fourth quarter of 1998, mainly because of a reduction in deliveries of fuselages for the Boeing 747-400 programme. A $20 million charge was also taken to cover a cost estimate increase on the Directional Infrared Countermeasures (DIRCM) programme.
Boeing is slashing 747 production from a high of five a month in late 1997 to two a month this year and could go as low as one a month from 2000 as part of a wider cut to airliner production announced late last year.
Northrop Grumman is a supplier of major structures and subassemblies to virtually every Boeing airliner and apart from the 747 fuselage, it also supplies Boeing with all 747 doors and tails.
In 1997, commercial aircraft assemblies accounted for 14% of total company sales of $9.2 billion. The company is already pushing through a job loss programme affecting 3,700 employees, much of which is attributable to the Boeing cutbacks.
Some $120 million of the charge resulted from reduced 747 fuselage rates and the knock-on effect on production efficiencies at Northrop Grumman's production sites. In early December, the firm estimated that the cut would reduce 1999 sales by $150 million, followed by similar amounts over the next three years. It now estimates the sales loss this year at $350 million. Overall, the company anticipates a slight sales rise this year.
The DIRCM charge results from a schedule stretch out because of delays in completing the second series of live-fire tests.
Source: Flight International