Boeing 2012 Annual Report Download - page 111

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posted in an amount determined by our credit ratings. The fair value of foreign exchange and commodity
contracts that have credit-risk-related contingent features that are in a net liability position at December 31,
2012 was $9. At December 31, 2012, there was no collateral posted related to our derivatives.
Note 19 – Significant Group Concentrations of Risk
Credit Risk
Financial instruments involving potential credit risk are predominantly with commercial aircraft customers
and the U.S. government. Of the $10,170 in gross accounts receivable and gross customer financing
included in the Consolidated Statements of Financial Position as of December 31, 2012, $4,921 related
predominantly to commercial aircraft customers ($803 of accounts receivable and $4,118 of customer
financing) and $2,788 related to the U.S. government.
Of the $4,480 in gross customer financing, $2,827 related to customers we believe have less than
investment-grade credit including American Airlines, United/Continental Airlines, and Hawaiian Airlines
who were associated with 12%, 9% and 8%, respectively, of our financing portfolio. Financing for aircraft
is collateralized by security in the related asset and in some instances security in other assets as well.
BDS Fixed-Price Development Contracts
Fixed-price development work is inherently uncertain and subject to significant variability in estimates of
the cost and time required to complete the work. BDS fixed-price contracts with significant development
work include Airborne Early Warning and Control (AEW&C), Family of Advanced Beyond Line-of-Sight
Terminals (FAB-T), India P-8I, Saudi F-15, USAF KC-46A Tanker and commercial and military satellites.
The operational and technical complexities of these contracts create financial risk, which could trigger
termination provisions, order cancellations or other financially significant exposure. Changes to cost and
revenue estimates could also result in lower margins or a material charge for reach-forward losses in 2013.
747 and 787 Commercial Airplane Programs
The development and initial production of new commercial airplanes and new commercial airplane
derivatives, which include the 747 and 787, entail significant commitments to customers and suppliers as
well as substantial investments in working capital, infrastructure and research and development. The 747
and 787 programs have gross margins that are breakeven or near breakeven at December 31, 2012.
Ongoing weakness in the air cargo market and lower-than-expected demand for large commercial
passenger aircraft have resulted in pricing pressures and fewer 747 orders than anticipated in 2012. We
have a number of unsold Freighter and Intercontinental production positions beyond 2013. If we are unable
to obtain orders for multiple Freighter aircraft in 2013 consistent with our near-term production plans, we
may be required to take actions including reducing the number of airplanes produced and/or building
airplanes for which we have not received firm orders. If market and production risks cannot be mitigated,
the program could face an additional reach-forward loss that may be material.
The cumulative impacts of production challenges, change incorporation, schedule delays from prior periods
and customer and supplier impacts have created significant pressure on 787 program profitability. If risks
related to this program, including risks associated with change incorporation, planned production rate
increases, or introducing the 787-9 derivative as scheduled cannot be mitigated, the program could face
additional customer claims and/or supplier assertions, as well as a reach-forward loss that may be material.
See Note 24.