McDonnell Douglas loss due to write-off of MD-11 losses

From:         kls@ohare.Chicago.COM (Karl Swartz)
Date:         22 Jan 96 04:40:35 
Organization: Chicago Software Works, Menlo Park, California
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Friday's Wall Street Journal (and Saturday's Los Angeles Times)
reported that McDonnell Douglas wrote off $1.84 billion of deferred
costs from the development of the MD-11.  MD had been amortizing the
MD-11's development costs over 301 aircraft, which according to the
WSJ was the minimum number MD had expected to sell.  However, firm
orders total only 168 aircraft, of which 147 have already been
delivered.  Options amount to only another 60 aircraft.

According to the LA Times, analyst Paul Nisbet "said the change was
a 'prudent' action and 'something they would have had to clean up
whether they had any intention or not' of shedding the MD-11 program."

McDonnell Douglas said the company "most definitely does not" plan to
stop building the MD-11.  However, the write-off and the weak order
book are painful reminders that the MD-11 has not done well in the
market against its primary competitors, the Boeing 777 and Airbus
A340.  Without a significant order soon, MD will have to either stop
building MD-11s or build an inventory of "white tails".

--
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