Boeing Co. is being sued by shareholders who claim the Chicago-based company misled them about problems with its 787 Dreamliner, which has been plagued by setbacks.
The $202 million Livonia (Mich.) City Employees Retirement System filed suit Nov. 13 in U.S. District Court in Chicago, saying Boeing knew of problems with the 787 for several weeks before it told shareholders but failed to disclose the information in an effort to prop up the stock price.
Boeing also has been sued in federal court in southern Illinois by a Dallas-based law firm. Both suits seek class-action status on behalf of shareholders who bought the stock between May 4 and June 22.
The suit by the Michigan pension fund also names CEO James McNerney and Scott Carson, president of its commercial aircraft unit. Mr. Carson has since retired.
In a securities filing Nov. 17, Boeing said the lawsuits are without merit and it will vigorously defend them.
The Michigan pension fund claims in its suit that Boeing officials maintained through mid-June the company was on track for its first flight of the airplane by June 30, 2009, even though executives knew in May that the 787 had encountered structural problems that would require further delays.
After reassurances at the Paris Air Show as late as June 17 that the 787 schedule was on track, Boeing surprised Wall Street with a June 23 announcement that the plane's first flight would be delayed because of a structural flaw where the wing meets the body of the aircraft. The problem occurred during testing in May.
Mr. Carson later told investors that the company thought it had found a solution that would allow flight testing to continue but only realized after the Paris show that it would have to delay the program to make a more substantial repair.
The suit claims that Boeing's “material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing the structural problem in the 787 and its adverse impact on the first flight and delivery schedules of the 787 from the investing public and supporting the artificially inflated price of Boeing's common stock.”
Boeing stock rose to $53.39 on June 9 from $41.77 on May 4, but shares dropped 12% on the bad news and later slipped as low as $38.33 by July 7.
John Pletz is a reporter at Crain's Chicago Business, a sister publication of Pensions & Investments