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Exclusive-Boeing delays plans for production ramp-up, sources say

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Exclusive-Boeing delays plans for production ramp-up, sources say
© Reuters. FILE PHOTO: A Boeing 737 jetliner is pictured during a tour of the Boeing 737 assembly plant in Renton. REUTERS/David Ryder/File Photo

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By Valerie Insinna and Tim Hepher

(Reuters) – Boeing (NYSE:) has delayed plans for its supply chain to ramp up production of its bestselling 737 jetliner, according to a presentation seen by Reuters, as the company deals with regulatory curbs on its output and increased scrutiny following a mid-air blowout on a MAX 9 in January.

The U.S. Federal Aviation Administration in late January barred Boeing from increasing production of the 737 MAX following the Jan. 5 accident, and could prove a setback in the future as the U.S. planemaker struggles to raise production levels to compete with its European rival Airbus.

Boeing was not immediately available for comment.

According to Boeing’s latest 737 supplier master schedule seen by Reuters, the supply chain was previously told to inrease production rates from the equivalent of 38 aircaft a month to 42 in February this year which is now delayed to June.

Boeing will push back a rate increase from 47 jets a month from August 2024 to January 2025.

A move to 52 737s per month scheduled for February 2025 is now estimated to take place in June 2025, a timeline that would allow Boeing to stay on track for its goal of producing 50 jets per month in 2025-2026, a critical enabler for achieving $10 billion in free cash flow in the same timeframe.

Boeing won’t hit its pre-pandemic goal of 57 aircraft per month until February 2026, from a previous estimate for August 2025.

The supplier master schedule lays out the expectation for when suppliers should be at a given production rate. While it usually predates Boeing’s own shift to a new rate, it is an important signal of confidence for the supply chain, who rely on it for planning future workforce and equipment investments.

It also comes as Boeing is in talks to buy back its former subsidary Spirit AeroSystems (NYSE:), the Wall Street Journal reported Friday, as the Wichita-based company has also dealt with substantial production delays and hits to its balance sheet.

Boeing leaders had indicated the supply chain would keep ramping up according to previous plans issued in December, but acknowledged there could be future changes due to an ongoing FAA audit of Boeing’s production system.

Boeing has said its 737 production line in Renton, Washington, is nominally operating at a rate of 38 jets per month. However, the actual output is lower, as the company has had to periodically pause the line to address quality issues, Chief Financial Officer Brian West said last month.

West said then that maintaining the master schedule from December will force Boeing to carry extra inventory and contribute to a cash usage in the first quarter of 2024, but it would also allow suppliers to stay stable and cut the likelihood of production defects that previously hampered ramp up plans.

Some suppliers had privately questioned whether Boeing would maintain its previous master schedule if the production freeze extended past a couple months, while others raised concerns that small and medium sized businesses could find themselves in financial straits after making costly capital investments in anticipation of higher production.

The FAA has not indicated what criteria Boeing will need to meet to be approved for future production rate increases. Earlier this week, FAA administrator Mike Whitaker told Boeing CEO Dave Calhoun that the company would have 90 days to develop a plan to address quality issues.

Boeing expects to ramp up to an actual production rate of 38 737s a month in the second half of they year, “but it will be dictated by the regulator,” West said last month.

Airbus is producing about 50 single-aisle jets per month, Reuters previously reported, and its CEO said in February the company is on track to reach a key production target of 75 narrowbody jets per month in 2026.

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Palantir, Anduril join forces with tech groups to bid for Pentagon contracts, FT reports

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(Reuters) – Data analytics firm Palantir Technologies (NASDAQ:) and defense tech company Anduril Industries are in talks with about a dozen competitors to form a consortium that will jointly bid for U.S. government work, the Financial Times reported on Sunday.

The consortium, which could announce agreements with other tech groups as early as January, is expected to include SpaceX, OpenAI, autonomous shipbuilder Saronic and artificial intelligence data group Scale AI, the newspaper said, citing several people with knowledge of the matter.

“We are working together to provide a new generation of defence contractors,” a person involved in developing the group told the newspaper.

The consortium will bring together the heft of some of Silicon Valley’s most valuable companies and will leverage their products to provide a more efficient way of supplying the U.S. government with cutting-edge defence and weapons capabilities, the newspaper added.

Palantir, Anduril, OpenAI, Scale AI and Saronic did not immediately respond to a Reuters request for comment. SpaceX could not be immediately reached for a comment.

Reuters reported earlier this month that President-elect Donald Trump’s planned U.S. government efficiency drive involving Elon Musk could lead to more joint projects between big defense contractors and smaller tech firms in areas such as artificial intelligence, drones and uncrewed submarines.

Musk, who was named as a co-leader of a government efficiency initiative in the incoming government, has indicated that Pentagon spending and priorities will be a target of the efficiency push, spreading anxiety at defense heavyweights such as Boeing (NYSE:) , Northrop Grumman (NYSE:) , Lockheed Martin (NYSE:) and General Dynamics (NYSE:) .

Musk and many small defense tech firms have been aligned in criticizing legacy defense programs like Lockheed Martin’s F-35 fighter jet while calling for mass production of cheaper AI-powered drones, missiles and submarines.

Such views have given major defense contractors more incentive to partner with emerging defense technology players in these areas.

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Weakened Iran could pursue nuclear weapon, White House’s Sullivan says

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By Simon Lewis (JO:)

(Reuters) -The Biden administration is concerned that a weakened Iran could build a nuclear weapon, White House National Security Adviser Jake Sullivan said on Sunday, adding that he was briefing President-elect Donald Trump’s team on the risk.

Iran has suffered setbacks to its regional influence after Israel’s assaults on its allies, Palestinian Hamas and Lebanon’s Hezbollah, followed by the fall of Iran-aligned Syrian President Bashar al-Assad.

Israeli strikes on Iranian facilities, including missile factories and air defenses, have reduced Tehran’s conventional military capabilities, Sullivan told CNN.

“It’s no wonder there are voices (in Iran) saying, ‘Hey, maybe we need to go for a nuclear weapon right now … Maybe we have to revisit our nuclear doctrine’,” Sullivan said.

Iran says its nuclear program is peaceful, but it has expanded uranium enrichment since Trump, in his 2017-2021 presidential term, pulled out of a deal between Tehran and world powers that put restrictions on Iran’s nuclear activity in exchange for sanctions relief.

Sullivan said that there was a risk that Iran might abandon its promise not to build nuclear weapons.

“It’s a risk we are trying to be vigilant about now. It’s a risk that I’m personally briefing the incoming team on,” Sullivan said, adding that he had also consulted with U.S. ally Israel.

Trump, who takes office on Jan. 20, could return to his hardline Iran policy by stepping up sanctions on Iran’s oil industry.

© Reuters. FILE PHOTO: Iranian flag flies in front of the UN office building, housing IAEA headquarters, in Vienna, Austria, May 24, 2021. REUTERS/Lisi Niesner/File Photo

Sullivan said Trump would have an opportunity to pursue diplomacy with Tehran, given Iran’s “weakened state.”

“Maybe he can come around this time, with the situation Iran finds itself in, and actually deliver a nuclear deal that curbs Iran’s nuclear ambitions for the long term,” he said.

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Ukraine says Russian general deliberately targeted Reuters staff in August missile strike

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(Reuters) -Ukraine’s security service has named a Russian general it suspects of ordering a missile strike on a hotel in eastern Ukraine in August and said he acted “with the motive of deliberately killing employees of” Reuters.

The Security Service of Ukraine (SBU) said in a statement on Friday that Colonel General Alexei Kim, a deputy chief of Russia’s General Staff, approved the strike that killed Reuters safety adviser Ryan Evans and wounded two of the agency’s journalists on Aug. 24.

In a statement posted on Telegram messenger the SBU said it was notifying Kim in absentia that he was an official suspect in its investigation into the strike on the Sapphire Hotel in Kramatorsk, a step in Ukrainian criminal proceedings that can later lead to charges.

In a separate, 15-page notice of suspicion, in which the SBU set out findings from its investigation, the agency said that the decision to fire the missile was made “with the motive of deliberately killing employees of the international news agency Reuters who were engaged in journalistic activities in Ukraine”.

The document, which was published on the website of the General Prosecutor’s Office on Friday, said that Kim had received intelligence that Reuters staff were staying in Kramatorsk. It added that Kim would have been “fully aware that the individuals were civilians and not participating in the armed conflict”.

The Russian defence ministry did not respond to a request for comment on the SBU’s findings and has not replied to previous questions about the attack. The Kremlin also did not respond to a request for comment. Kim did not reply to messages sent by Reuters to his mobile telephone seeking comment about the SBU’s statement and whether the strike deliberately targeted Reuters staff.

The SBU did not provide evidence to support its claims, nor say why Russia targeted Reuters. In response to questions from the news agency, the security agency declined to provide further details, saying its criminal investigation was still under way and it was therefore not able to disclose such information.

Reuters has not independently confirmed any of the SBU’s claims.

Reuters said on Friday: “We note the news today from the Ukrainian security services regarding the missile attack on August 24, 2024, on the Sapphire Hotel in Kramatorsk, a civilian target more than 20 km from Russian-occupied territory.”

“The strike had devastating consequences, killing our safety adviser, Ryan Evans, and injuring members of our editorial team. We continue to seek more information about the attack. It is critically important for journalists to be able to report freely and safely,” the statement said.

Reuters declined to comment further on the allegation that its staff were deliberately targeted.

The SBU statement said Kim had been named a suspect under two articles of the Ukrainian criminal code: waging an aggressive war and violating the laws and customs of war.

“It was Kim who signed the directive and gave the combat order to fire on the hotel, where only civilians were staying,” it said.

Evans, a 38-year-old former British soldier who had worked as a safety adviser for Reuters since 2022, was killed instantly in the strike.

The SBU statement gave some details about how the strike had occurred, according to its investigation.

“To carry out the attack, the Russian colonel general involved one of his subordinate missile forces units,” the Ukrainian agency said, adding that the strike was carried out with an Iskander-M ballistic missile.

The SBU did not identify the specific unit.

© Reuters. FILE PHOTO: Reuters safety advisor Ryan Evans holds a cat during a news assignment, as Russia's attack on Ukraine continues, during intense shelling in Kramatorsk, Ukraine, December 26, 2022. REUTERS/Clodagh Kilcoyne/File Photo

Ivan Lyubysh-Kirdey, a videographer for the news agency who was in a room across the corridor, was seriously wounded. Kyiv-based text correspondent Dan Peleschuk was also injured.

The remaining three members of the Reuters team escaped with minor cuts and scratches.

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