Surprised? No Real Reason To Be
Boeing’s announcement of its purchase of Vought Aircraft’s 787 operations brings more of the outsourced work back within the company’s immediate oversight - however, to suggest that this move is a surprise or one that was not expected is quite anaemic.
Let’s not forget that this seeds to this move were sown perhaps as far back (if not farther back) as last spring when Boeing stepped in to acquire the 50% stake Vought held in Global Aeronautica with Alenia. What has compounded the move to buy up the oft-regarded weakest link in the 787 supply chain is based on various factors.
Critically, the 787 has a backlog stretching out to 2021 and beyond and without deliveries, the program is costing money in compensation as a result of yet more recent delays. Being able to work through the new set woes and establish a fix for the wing/side-of-body join as well as devise a new certification and delivery regime, the fundamental issue for Boeing remains unchanged - to start a production ramp up that gets the whole supply chain churning out 787’s.
Whether a second 787 line is based in Everett, South Carolina or anywhere else is not critical at this stage until the first line passes 50% saturation.
Boeing 787-8 Being Towed
Image Courtesy Of Boeing
In contrast to previous Boeing airplanes, the 787 does not need workers possessing the same level of technical expertise to simply assemble/”snap together” an airplane whose key components have been fabricated elsewhere.
You can appreciate Boeing’s logic for going with a new, cheaper labour force that wasn’t prone to striking every half decade and instead train them up for dealing with assembly and not manufacture. That travelled work on the first few shipsets rocked the entire supply chain in the early days of the program shows that the new work force was not adept to dealing with technical issues that perhaps staff in Everett/Renton may have been quick to identify.
Bringing that workforce in house and relieving Vought of its numerous obligations and difficulties means that there will be less reason for such production problems to crop up when the 787-9 enters production.
Boeing hasn’t been shy about farming out work - almost 30% of the last all new jetliner, the 777, is built by other partners - the difference with the 787 is that much more of it is built and distributed on a global scale.
With a fourth 747-400 undergoing conversion in Taiwan, Boeing will have a far more flexible approach at work dissemination when a second line is set up. Depending on where that line is will be dictated by tier one suppliers on the existing 787 line getting close to maximum capacity and also by the pace at which they can increase beyond that to accommodate work for a second line. What’s the logic in having two lines that are only churning out work that barely keeps just one line busy?
Furthermore, Boeing’s remarks post-IAM strike fall that it would consider working elsewhere points to Washington State having to re-assess the manner in which strikes have hindered the ability of staff to perhaps raise their appeal for keeping work in-state rather than lose it to another rival.
Timing too is critical - a second 787 line in Everett can be in place far quicker than say, South Carolina. Equally - the speed at which a second line is developed depends on any revised rate Boeing has in place to go beyond 10-per-month.
787 customers will probably have a double-edged sword view of this deal. Firstly, it doesn’t solve the near term issues of stabilising the program and getting the airplane flying and secondly, those waiting toward the tail end of the delivery queue can take heart that a second line is all but inevitable and they may get their 787’s faster than with just one operable line.
With Airbus’ own A350XWB blocked out until 2018 and almost zero chances of getting new build A330’s before 2012, there’s very little incentive for 787 customers to “jump ship” and go elsewhere - because they won’t get very far. Alas, Boeing’s decision to lop 777 rates from year could be a short lived affair. There is every incentive now to keep rates unchanged if 787 customers wish to take on 777’s as interim lift.
Boeing’s decision to wait for over 12 months to tie up this deal poses the classic question of “why do it now“.
There probably isn’t a singular answer to that, suffice to say that it’s positioning itself for a major overhaul in the way it gets a hold of the 787 program - from suppliers to vendors, to design and fabrication to assembly and delivery - this purchase means that the company intends to start showing dividends from its acquisition pretty quick, most likely starting from the likes of Spirit AeroSystems and the Japanese Heavies who may commit to increased rates of production when and if a second line announcement is made.
The prospect of Spirit being an eventual buyer is tantalising too - having worked formidably since the takeover of Boeing’s Wichita operations and being the most frugal tier one supplier in the 787 supply chain so far, there’s a compelling case for a deal here.
In terms of Boeing’s importance - getting the 787 airborne will be of far more importance than a second line.
45 comments July 7th, 2009
