From Boeing’s fall, then rise, and then fall again on the stock market to labor union pension fund managers spending $1,185 on one — yes, one — bottle of wine, to border protection officials reacting to the Zika virus, it’s been a busy couple of weeks for Charleston-related business news.
The aerospace giant’s earnings forecast for the coming year came in lower than analysts expected, and Wall Street punished the company’s stock in the days after the Jan. 27 announcement. Boeing shares hit a 52-week low of $115.02 that day and then see-sawed back and forth, finally closing on Friday at $122.56 per share.
Despite the volatility, Greg Smith, Boeing’s chief financial officer, was unbowed. During a Cowen and Co. aerospace conference this week, Smith pointed out that demand for commercial airplanes remains strong.
“You’ve really got to look at the fundamentals, particularly around passenger growth, and we’re continuing to see robust growth frankly over the next 10 to 20 years,” Smith said.
China, for example, will need about 6,000 new airplanes over the next two decades to meet growing demand in that country. The replacement market will continue to grow as airlines’ fleets start aging. And the 787 Dreamliner — the wide-body built in North Charleston and Everett, Wash. — is attractive to airlines because its size and fuel-efficiency is opening route structures that never before could exist.
Boeing delivered 135 Dreamliners last year and expects to bring at least that many to customers in 2016.
About 70 percent of this year’s deliveries will be the newer and longer 787-9 model, an airplane Smith called “the smoothest introduction of a derivative that I’ve ever seen at the highest production rate of a wide-body program in aviation history.”
Smith said he’s confident in the Dreamliner plants’ ability to boost production later this year from 10 to 12 planes per month.
“That team has done a great job,” Smith said. “Obviously, our on-time deliveries are a testament to that team. Operationally, we’re seeing improvements. Reliability has improved a lot, but we’ll never be satisfied. We’ve made some great progress, but we’ve still got a lot of work in front of us.”
That includes production this year of the 787-10 — a straightforward stretch of the 787-9 that will be built only in North Charleston.
“We’ve got to get the ‘Dash 10’ brought in smoothly and we have good plans in place to do that,” Smith said, adding that the commonality of the 787-10 to the 787-9 — they are about 95 percent the same plane — should make for an easy product introduction.
“It won’t be as challenging as it was bringing the ‘Dash-9’ in,” Smith said.
The managers of a pension fund for the union that wants to represent Boeing workers in North Charleston — the International Association of Machinists — are being sued by the U.S. Department of Labor.
In a complaint filed Jan. 24 in federal court in Washington, D.C., the agency alleges trustees of the IAM National Pension Fund “generally engaged in a pattern of conduct in which they disregarded their fiduciary duties.”
Among the allegations is that trustees ignored the recommendations of a search firm and the fund’s chief investment officer by hiring Graystone Consulting, which charged $125,000 more in fees than the next-highest candidate. One of the fund’s trustees also billed the fund up to $750 per day to travel to and attend meetings, even though policy forbids such compensation.
Trustees also used pension fund money to “pay for unnecessary, lavish parties and dinners for its trustees and service providers as well as trips for board meetings,” the complaint states.
According to the lawsuit, a trustee, six staffers and a service provider used pension fund money to pay for an October 2011 dinner featuring bottles of wine priced as high as $1,185 apiece. In March 2011, fund money paid a $1,954.39 investment committee dinner bill, which included two bottles of wine at $125 a bottle and two bottles of wine costing $375 apiece.
Pension fund money also was used to pay $90,000 for a pair of holiday parties and $2,680,23 for an employee’s retirement party, according to the complaint.
The labor department wants a judge to order the trustees to pay back the pension fund for any fees, salaries, compensation and other financial benefits they received. The department also wants the IAM’s pension fund “to implement reforms to ensure that the wrongdoing ... does not recur.”
The IAM’s pension fund trustees have not filed a response to the lawsuit. A court date has not been scheduled.
U.S. Customs and Border Protection said this week it is working closely with the federal Health and Human Services department to battle the Zika virus.
Locally, that means observing all travelers entering the U.S. through the Port of Charleston — either on cruise ships or cargo vessels, if they arrive for an extended stay.
“As part of standard operations, U.S. Customs and Border Protection personnel observe all travelers entering the United States at all ports of entry for general overt signs of illnesses,” said Rob Brisley, public affairs officer for the Department of Homeland Security. “If anyone exhibits signs of illness or a (customs) officer has another concern, the individual will be referred to secondary for additional inspection, and possibly referral to Centers for Disease Control and Prevention.”
Brisley said customs and CDC officials “have policies and procedures in place to identify travelers that are known by U.S. public health officials to have a communicable disease and to handle them in a manner that minimizes risk to the public.”
Zika virus is spread through mosquito bites. The most common symptoms are fever, rash, joint pain and red eyes. The virus also has been linked to birth defects and the CDC recommends that pregnant women should be tested after returning from affected areas, such as Mexico, the Caribbean and South America.
Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_