Photographer: Nelson Ching/Bloomberg

Cyber Hit on China-Owned Boeing Supplier Sends Stock Down 19%

  • `Criminal Act' behind $55 million of damages at Austria's FACC
  • Parts-maker for aerospace leaders is 55% controlled by AVIC

Cyberfraud sent shares of Austria’s FACC AGto their steepest drop since the supplier of parts to Boeing Co.and Airbus Group SE began trading in 2014. The company put damages at 50 million euros ($55 million) -- one of biggest losses after a hacking event for its size.

“The financial accounting department of FACC Operations GmbH was the target of cyber fraud,” the company, whose biggest investor is Aviation Industry Corp. of China, said Wednesday afternoon. FACC said earlier in the day that “cyberattack activities were executed from outside.” The stock closed 17 percent lower.

While high-profile hacks against businesses spanning JPMorgan Chase & Co. to retailer Target Corp. have led to the theft of millions of customer records and caused short-term share slides, the financial impact of cyber crime is often hard to measure. The average cost of a data breach is $3.8 million, a survey by IBM and the Ponemon Institute estimated. TalkTalk Telecom Group Plc said an attack in October caused losses of up to 35 million pounds ($50 million).

Deutsche Bank co-CEO John Cryan told reporters today at World Economic Forum in Davos, Switzerland that the risk of cyber crimes are his biggest concern in 2016.

China Link

The FACC case is intriguing because the company is ultimately controlled by China, often linked to intellectual property theft, via AVIC’s 55 percent holding, said Rick Gamache, a managing director at U.S. cyber-security firm Wapack Labs. FACC has “some really neat technology,” and the attack could potentially have come from a competitor company or a nation state, he said.

“It raises a lot of questions,” said Daniel Damaska, an analyst at Raiffeisen Centrobank in Vienna who is reviewing his “hold” rating on FACC shares. “Even if the attack didn’t effect production, investors and the public need to get more insight on what happened.”

FACC, based in Ried im Innkreis, a town between Vienna and Salzburg, fell 1.07 euros to 5.32 euros at market close in Vienna. The aerospace supplier, listed at 9.50 euros by AVIC in June 2014, has lost more than a third of its worth in 12 months and is valued at 245 million euros.

High Cost

Tom Draper, technology and cyber-practice leader at Arthur J. Gallagher, said damages of 50 million euros seem high. “I can’t see how you can spend that much,” he said, adding that FACC might be factoring in future intelligence-technology upgrades or canceled contracts.

While the total direct cost of Target’s 2013 breach was probably more than $500 million, Draper said, the U.S. retailer has annual revenue of $73 billion, versus 529 million euros at FACC in its last fiscal year. The Austrian group’s Chief Financial Officer, Minfen Gu, declined to comment when reached by phone.

The company, which makes composite components for most Airbus and Boeing models, the Chinese C919, Sukhoi’s Superjet and the Bombardier Inc. CSeries, as well as interiors for business jets and helicopters, is scheduled to report third quarter-earnings Thursday. It had a 9.6 million-euro loss in fiscal 2015.

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