Everett, Wash.
Published: Saturday, March 29, 2008

Boeing takes 787 supplier Vought under its wing

Boeing buys a stake in key 787 fuselage maker Vought Aircraft Industries, which has been a major source of Dreamliner delays.

By Michelle Dunlop
Herald Writer

 EVERETT -- In a move to straighten out its 787 jet program supply chain, the Boeing Co. will buy a problematic supplier's shares of a Dreamliner assembly facility in South Carolina.

Boeing announced Friday it will acquire Vought Aircraft Industries' stake in Global Aeronautica LLC, a fuselage sub- assembly facility for Boeing's 787 Dreamliner jet. Only last November, Vought admitted it was one of the weakest links among Boeing's global 787 suppliers, who are responsible for designing and building major chunks of the Dreamliner. Boeing has cited supplier and assembly issues as explanations why the 787 is running nearly a year behind schedule.

The deal allows Vought to "focus on its primary business of delivering quality aft fuselage structures for the 787," said Pat Shanahan, Boeing's vice president of the 787 program.

Boeing will enter a joint venture for Global Aeronautica with the North American subsidiary of Alenia Aeronautica, which also builds 787 sections in Italy. Workers at Global Aeronautica, located near Vought, assemble Alenia's 787 structures along with sections from other Boeing partners.

Terms of the transaction were not disclosed.

"All three partners in this transaction -- Boeing, Vought and Alenia -- believe these changes will enable the 787 team to continue to overcome supply-chain challenges of the program," Shanahan said.

Last October, Boeing first pushed out the first delivery of its 787 Dreamliner by six months. The company said then fastener shortages forced its partners to use temporary parts that ultimately caused final assembly difficulties in Everett. Boeing announced subsequent delays in December and January, placing delivery of the first 787 in early 2009. But the company hasn't elaborated on its schedule, saying it would do so in early April.

Boeing has won nearly 900 orders for its 787 jet, which is expected to offer greater fuel efficiency than similar jets since it is made mostly of carbon fiber composite material. But the Dreamliner's warm reception in the marketplace hasn't kept Boeing's stock at a cruising altitude. Delays have driven Boeing's stock down more than $30 from a high of $107.83 last July to $73.47 at the close of the market Friday.

Since announcing its last unspecified delay in January, Boeing has battled persistent rumors of further setbacks. Last week, the chairman of Boeing's largest 787 customer, International Lease Finance Corp., predicted another six-month delay as Boeing works through design changes to the Dreamliner's wing box. And several analysts, including ones with Goldman Sachs and Citigroup, also believe the 787 will suffer another major delay.

Boeing's update on the 787 program could come as early as next week.

The company's decision to buy stake in Global Aeronautica was applauded by the union representing Boeing's engineers and technical workers. The Society of Professional Engineering Employees in Aerospace called Boeing's move a "necessary first step" to bringing work back to its 21,000 Puget Sound employees "who can get the program back on schedule." Boeing's unions criticized the company's decision to outsource much of the work on the 787.

SPEEA members travel to 787 suppliers frequently and work overtime correcting problems from outside suppliers, the union said on Friday. The labor group's three-year contract with Boeing expires in December.

"We are hopeful this is an indication that the company realizes that not just anyone can engineer, design and build these very complex aerospace products," said Ray Goforth, SPEEA's executive director. "Our members have been saying for some time that this global network is not working."

After being reassigned last fall, Boeing's former 787 program leader, Mike Bair, suggested the company wouldn't rely on such a far-flung supply chain in building its next jet. With partners in Kansas and South Carolina, Japan and Italy, Boeing has to use a fleet of modified 747 freighters just to ferry assemblies back and forth. Bair noted Boeing likely wouldn't use some of its 787 suppliers again but declined to name which ones.

Vought chief executive Elmer Doty reported in a conference call earlier this month that the company had made "great progress" after acknowledging last November that Vought had asked Boeing for help with its production schedule. Boeing has an aggressive 787 delivery schedule, originally intending to deliver 112 Dreamliners in 2009.

"The Vought 787 team remains focused on manufacturing composite fuselage sections for this incredible airplane," Doty said in a press statement Friday.

Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.
© 2009The Daily Herald Co., Everett, WA