Boeing's Ramped-Up Production Hits Turbulence
The Dow Jones Industrial Average is trading 212 points higher in midafternoon after new Federal Reserve Chairwoman Janet Yellen testified on Capitol Hill today. Yellen stated support for the strategies put in place by former Chairman Ben Bernanke and said there is no set course for the Fed as it continues to trim bond purchases. Yellen's comments give investors confidence that there are not likely to be drastic or significant changes to Fed policy under her guidance. With that in mind, here are some companies making headlines in the market today.
Boeing is leading the Dow higher today, up 2.4%. Despite today's gains, the aviation juggernaut has hit some turbulence after soaring smoothly in 2013. One of the bright spots in this young year was news of the company's production rate of its 787 Dreamliner reaching 10 planes a month, the fastest rate for a twin-aisle jet. Unfortunately, it now appears Boeing workers in South Carolina are struggling to keep up with the faster pace. This is causing some production to be sent to Boeing's larger plant in Everett, Wash.
"While we try to minimize it, traveled work is something we deal with in all production programs," said Boeing spokesman Marc Birtel, according to Reuters. "The 787 program remains on track to meet its delivery commitments in 2014 and we are producing 787s at a rate of 10 per month as planned."
This is a big factor for investors to watch over the next couple of quarters as the company has had to hire extra teams to inspect work being sent from South Carolina to Washington, as well as hiring contract workers to help the South Carolina plant stay on pace, which could put pressure on margins.
While this is a headache for Boeing, it is also the right move as investors are hoping the company can ramp up production on its commercial aircraft to take advantage of a massive backlog of orders. Boeing's demonstrated capacity to execute its ramped-up production would be a huge win for the company's financial performance in 2014 - which is extremely important as its defense business is expected to remain softer amid government budget cuts.
In other news, Tesla is busy fighting to maintain a business model that does not involve dealerships. Tesla has showrooms where potential car buyers can test its luxury, and fully electric, vehicles before completing the purchase online. Auto dealers in Ohio contend that this is a direct breach in legislation that requires a dealership to have a contract with an auto manufacturer to sell vehicles in Ohio.
There's definitely cause for worry among standard auto dealerships, as Tesla's way of doing business has been a hit with consumers who say it removes typical headaches from vehicle purchases. If Tesla were to successfully execute its business model, what stops other automakers from cutting out the middleman to secure more profit? A move like that could cost tens of thousands of jobs at dealerships in every state.
While the cause for concern is real, at the moment, Tesla's electric vehicles remain in the very early innings of a long-term story -- the company is just now reaching production of 550 cars per week. For Tesla investors, watching the success of the company's legislation battles regarding its sales model will be of huge interest going forward through 2014 and beyond.
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The article Boeing's Ramped-Up Production Hits Turbulence originally appeared on Fool.com.Daniel Miller has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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