Boeing to pay $17 million to settle plane production issues

Federal officials say Boeing will pay at least $17 million and take steps to fix production problems on its 737 jets including the Max. The Federal Aviation Administration said on Thursday that the settlement covers the installation of unapproved sensors and other parts on some Boeing 737 NG and 737 Max planes built between 2015 and 2019.

The settlement, while not a large sum for Boeing - the company had $15 billion in revenue in 2020, a down year -- is the latest black eye for the iconic American manufacturer. Boeing is still struggling to recover from two deadly crashes that led to a long grounding of Max jets worldwide and other problems that have plagued the Max and other aircraft models.

The FAA said Boeing will pay the $17 million civil penalty within 30 days and could be hit with up to $10.1 million in additional fines if it fails to take steps including preventing the use of unapproved parts. The FAA said Boeing also must analyze whether the company and its suppliers are ready to safely raise production rates for the 737.

Boeing said it “fully resolved” the problems in its production system and supply chain. “We continue to devote time and resources to improving safety and quality performance across our operations,” including ensuring that employees comply with regulatory requirements, the company said in a statement.

Shares of Chicago-based Boeing Co. rose 3% in morning trading after the CEO of its largest customer, Southwest Airlines, said the airline has room to add nearly 500 new planes in the coming years. Southwest CEO Gary Kelly told The Dallas Morning News that the airline will need more planes after adding new destinations and restoring its network after the coronavirus pandemic slowdown that hit travel last year.

Meanwhile, the US Trade Representative Katherine Tai said she is optimistic that the United States and Europe can settle a longstanding dispute over aircraft subsidies, leaving them free to focus on larger issues, including China’s nascent aircraft industry.

Tai, who is working to reset trade ties with allies across the world after former President Donald Trump’s tariff wars, declined to give any details about her talks with the European Union and Britain on the dispute, but struck an upbeat tone.

“It’s impossible to predict the organic development of any negotiation. But I want to underscore how optimistic I am,” Tai told Reuters in an interview late Wednesday. “We are giving it everything we’ve got. I also feel confident that that is being reciprocated across the table.”

The European Union’s trade chief Valdis Dombrovskis last week said Brussels and Washington were working to resolve the dispute over subsidies to aircraft makers by July 10.

Both sides agreed in March to suspend tariffs on billions of dollars of imports in a 16-year-old dispute at the World Trade Organization over subsidies for planemakers Airbus and Boeing. The suspension runs until July 10, with tariffs re-applying on July 11 if there is no solution

Asked how close the two sides were, Tai said simply, “fingers crossed.”

She said she was encouraged by Dombrovskis’ leadership and partnership, and would do everything in her power to create the “maximum conditions for success.”

“It took 16 years, but we finally got here. I just want to preserve every opportunity for us to come to a good outcome,” she said, noting that China had made no secret of its ambitions to become a global player in the commercial aircraft industry.

She added that in the face of this challenge, the U.S. and EU need to “figure out the things that have kept us at each other’s throats for a very long time so that we can turn our attention to the bigger question.”

Metals tariffs: Tai and her European counterparts declared a partial truce in a three year dispute over U.S. steel and aluminum tariffs, agreeing not to escalate retaliatory duties.

Dombrovskis said U.S. metals tariffs and the EU’s initial retaliatory duties from 2018 should be removed as soon as possible, adding that the two sides were working on doing this by the end of 2021.

Tai, who meets virtually with her counterparts from the Group of Seven wealthy democracies this week, said tariffs had gotten a lot of attention, but she was focused on formulating a new vision, more worker-centered vision for the global economy.

Asked if Washington would remove steel and aluminum tariffs as Europe expects, Tai said the bigger problem was global market distortion, a reference to overproduction by China. She has insisted that any solution to the metals tariff dispute be tied to a solution to global excess production capacity driven by China.