Stocks Tumble On Report Boeing Faces Criminal, Civil Probe Over 737MAX Production
After surging in early trading, rising as much as 400 points, the Dow Jones has given up all gains, and quick turned red, with the catalyst that sent the broad index negative a report from Dow Jones that Boeing – which yesterday warned things won’t return to normal for years – faces “criminal, civil scrutiny into years of 737 Max quality-control lapses”, after Company inspections found debris left in roughly half of undelivered 737 MAX jets; according to the report, the latest development “exposes the plane maker to greater legal liability than previously anticipated by industry and government officials.”
According to the report, “the inquiries build on a federal grand-jury investigation into hazardously designed flight-control systems” and as part of the expanded probes, Justice Department prosecutors and federal air-safety regulators have been scrutinizing potentially significant safety problems stemming from 737 MAX production missteps.
The grand jury probe has focused largely on what certain Boeing employees told Federal Aviation Administration officials about the dangers of a faulty stall-prevention feature before it led to two fatal MAX crashes in less than five months and prompted the March 2019 grounding of the global fleet, according to people familiar with the matter.
The report adds that FAA investigators have also been examining factory problems that raise red flags about the Chicago plane maker’s compliance with mandatory production rules and safeguards. As reported several months back, Boeing found debris mistakenly left behind by workers in fuel tanks or other interior spaces of approximately half of the MAX aircraft it inspected starting last November, according to a company spokesman.
The FAA is pursuing possible civil-enforcement action and is considering proposing a multimillion-dollar fine against Boeing regarding the debris issue, according to DJ sources. The agency also is drawing up plans for stepped up government oversight and enhanced assembly-line inspections amid anticipated resumption of MAX production in coming months.
The news was enough to break any upward momentum stocks may have had, with the Nasdaq slumping in the red well ahead of the Boeing news perhaps in response to the weekend’s Goldman report slamming the massive outperformance of the Top 5 tech names, which even Goldman said is unsustainable and “always ends in a steep drawdown.”
Tue, 04/28/2020 – 11:09