Textron's Strategic Analysis Report
Economic Forces
Inflation and Interest Rates. Through the last several quarters the Federal Reserve and its former Chairman Alan Greenspan have made measured and consistent increases in the Fed Funds Rate. This is the rate at which banks borrow from each other on terms as short as overnight; it also serves as a basis for every other interest rate in the economy. As the economy has been heating up recovering from recession the Fed has been forced to continue to increase the Fed Funds Rate to keep inflation in check. Rising interest rates trying to hold back inflation has caused the cost of money in the U.S. economy to increase. The only incentive for the companies to borrow money to develop new technology is if they have some guarantee from the government to buy it when it is completed, but if the government keeps up its spending habit inflation will only get worse which simply compounds the problem of rising investment costs.
Private Sector. If we look to the private sector to see the effects of the economy of the last few years we'll find that Boeing and Airbus, the only two major producers of commercial aircraft, both saw orders decline by 45% and 28% in 2001 as well as falling deliveries of 28% and 7% respectively (Yahoo! Finance). A few years later as the economy began to pick up, so did order for both companies. Airbus and Boeing for the last several years have had secret projects to develop the next plane of the future and both companies are just on the cusp of entering their creations into service Airbus' A380 is due in 2007 and Boeing's 787 Dreamliner is due in 2008. With traveler confidence on the rise there is no reason these companies as well as all the corporate jet manufacturers to have any losses. T ...