Suppliers Brace For Impact During Boeing Strike
September 8th, 2008
With the IAM strike in its early stages, Boeing’s various suppliers are bracing themselves for the knock-on effect of any prolonged industrial action.
Spirit AeroSystems issued a statement in response to Boeing’s labour strife in an attempt to allay fears for its own workforce that staff would not necessarily be under threat due to woes at their biggest customer.
Faced with the possibility that the first flight of the 787 is highly likely to slip as late as January 2009, Boeing’s hopes to deliver 25 787’s by the end of next year is looking increasingly like an impossible task. With a record backlog for the 787, the strike is hitting Spirit hard and it won’t be the only partner on the Dreamliner program that will end up suffering as a result of the IAM strike.
“We are working closely with our customer [Boeing] and taking the necessary steps as we respond to an unfortunate situation,” said Spirit President and CEO Jeff Turner.
All images courtesy of Spirit AeroSystems & Boeing
“Our experience shows this approach is a prudent solution for all stakeholders,” Turner said. “Today, Spirit is a financially stronger and a more diversified company than we were in 2005. As such, we will continue our normal efforts on certain Boeing products, as well as products for new customers including Airbus, Cessna, Gulfstream, Rolls Royce, Hawker Beechcraft and Sikorsky.“
Spirit AeroSystems decision to immediately cut back on production indicates the gravity with which it fears a long and drawn out strike at Boeing. The statement went on to say that it would reduce the working week, as well as implement a new production and delivery regime while the strike remains in force.
Spirit AeroSystems is a first tier supplier on the 787 Dreamliner program, building the monolithic, composite contoured Section 41 barrel measuring 42 feet long and 21 feet wide. The company also builds the 737 fuselage, as well as components for the 747, 767 and 777 families.
Another critical partner for Boeing is Fuji Heavy Industries (FHI).
FHI is responsible for the fabrication of the centre wing section on the 777 and 787 families.
“We do good business, especially for the 777,” said an FHI spokesperson.
“Right now we’re waiting for information from Boeing, but if this lasts one, two weeks, it would have some impact.“
It is conceivable that in the coming days and possibly weeks, other notable suppliers and partners to various 7-series programs will also evaluate their position in regard to the factory stoppage at Boeing and adjust their production capacity accordingly.
Importantly, the financial costs that Boeing may incur from these partners may inevitably force the company hand in bringing the dispute to a swift end.
In the meantime, airlines expecting delivery of new airplanes will have little choice but to wait even longer.
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Entry Filed under: Aeroplane, Aerospace, Air Transport, Air Travel, Airlines, Airplane, Airplane Order, Airplanes, Airport, Airports, Alenia, Aviation, Boeing, Boeing 737, Boeing 747, Boeing 747-8, Boeing 747-8F, Boeing 747-8I, Boeing 767, Boeing 777, Boeing 777-200LR, Boeing 777-300ER, Boeing 777F, Boeing 787, Boeing 787-3, Boeing 787-8, Boeing 787-9, Boeing Orders, Dreamliner, Fuji Heavy Industries, Global Aeronautica, Kawasaki Heavy Industries, Mitsubishi Heavy Industries, Spirit AeroSystems, Travel, Vought
6 Comments Add your own
1. Nash | September 8th, 2008 at 2:49 pm
The contractual obligations Boeing has to these Tier1 & Tier2 suppliers means that the cost base for the 787 will rocket.
Sure, it has 900 orders, but I wager that 850 or more is required to just breakeven.
2. Chris Wallace | September 8th, 2008 at 3:01 pm
I was under the impression Spirit had already stopped production of new Section 41 barrels as they were up to ZA021 or so. Of course, I don’t know what Spirit’s storage space is like, so it is possible those barrels are being stored vertically and cannot be worked on internally. Otherwise, I would expect Spirit could use the time to continue outfitting those barrels in preparation for shipment to Boeing.
I would imagine Alenia and, especially, Vought, will benefit from a delay in allowing them get caught up on not just production of new sections, but completion of existing ones.
While I harbor no illusions about the impact this will have on the 787 program, I do wonder if it lasts a month or so and allows the parts for ZA005 and ZA006 to be completed, would Boeing move ZA001 and ZA002 to another building so they could advance ZA003 and ZA004 and load in ZA005 and ZA006 because those planes could be assembled in weeks instead of the months ZA001-ZA004 are taking? That way, they’d more quickly have all six test planes completed and configured for testing?
3. Chris Wallace | September 8th, 2008 at 5:54 pm
I doubt Boeing would have launched the program with a break-even that high. Not to mention if it was that expensive to use sub-contractors, Boeing wouldn’t have. The whole point of this new way to assemble planes was to spread the costs around so program break-even was lower then doing it all in-house.
I expect the actual break-even (with current and projected overruns) is somewhere between 450-600 sales.
4. Jacobin777 | September 8th, 2008 at 6:38 pm
I agree on the 450-600 sales.
The sticking point for the unions is “more work in-house”…Boeing has already hired 9,000 workers the past 3 years.
Also, in the long run, it will hurt Boeing if their hands are “tied down”…
One union member on CNBC was stating “we make the best planes in the world”….that maybe true..however, there is another manufacturer called “EADS/Airbus” which is just as, if not more dominating than Boeing is…maybe he (along with thousands of others) need to tone down their hubris and rhetoric…its that attitude which got G.M. and Ford where it is now..
5. mike j | September 8th, 2008 at 8:23 pm
I agree with Chris Wallace above.
The 787 suppliers who are behind will greatly benefit a month or two of catch-up.
The 777 too, likely similar with 737, 747, 767.
And in the meantime Boeing will save a lot of money by not paying labor-costs.
And at some point (30 or 60 days out) the math-equations for savings vs penalties will cross and then magically a “new better offer” for the IAM will appear (ussually a few juicy points the Union Membership will accept mixed with just slightly better numbers rearranged).
But we’ll never really know Boeing’s strategy completely because those are top-secret.
6. johnny stick | September 9th, 2008 at 3:25 pm
I just read the local news article boasting about how some of the members voted for a strike so they could go hunting and get thier honey-dos completed before winter. If the percent of members who voted this way was enough to force the walk out, God help them, because Boeing won’t. If this is true, and not just some hyperbole, I no longer fell bad for those guys only making 56K a year and trying to figure out how to keep the house in retirement; they already spent thier retirement years going hunting while they were young.
Regardless, I hope Boeing can use this time to get that 787 dog and pony show airplane out of the way and get the 787 party started!
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