Business

<< Previous   of   Next >> Michael O'Leary / Herald file photo  (click to enlarge) Work progresses on the nose and center fuselage sections of the first 787 Dreamliner at the Everett plant in this photo from May. (click to enlarge) Scott Carson (click to enlarge) Mike Bair   ADVERTISEMENT   Related Stories • Boeing has 'great confidence' 787 will fly on time 2/6/08 • Boeing confirms new delay in 787's first flight, delivery 1/16/08 • Boeing edges Airbus on orders in 2007 1/16/08 • Boeing may again delay Dreamliner's first flight 1/15/08   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Monday, December 17, 2007 Global supply line works, says Boeing By Michelle Dunlop Herald Writer EVERETT -- Forging partnerships with global suppliers works. It's a message executives with the Boeing Co. have underscored in recent weeks after glitches in their worldwide supply chain forced a six-month setback in the delivery of its new 787 jet. The company's confidence in its global partners was called further into question after the former leader of the Dreamliner program suggested that Boeing would reconsider its far-flung supply line for future jet programs and wouldn't use some of the same suppliers in the future. "We believe in our global business model," said Scott Carson, president of Boeing Commercial Airplanes, during a 787 program update last week. However, Carson said he "wasn't pleased nor displeased" with the comments of former 787 head Mike Bair. "I think it was a difficult time for Michael," Carson said. Analysts can't reach a consensus on the significance of Bair's speech. Will Boeing cut ties with certain key global partners? Will it use a central manufacturing location for its next jet? But they do agree on one thing: Boeing isn't likely to scrap its global supplier chain completely. "We made a bunch of mistakes, and we learned a lot," said Bair, who oversaw the Dreamliner program through much of its critical stages. The fast-selling Dreamliner isn't the first jet for which Boeing has relied upon partners outside the United States. Going back at least to its 767 widebody jet, Boeing has outsourced work on its aircraft, noted Paul Nisbet, an analyst with JSA Research in Rhode Island. The company increased its use of global suppliers even more with its next jet, the 777. About 25 percent of the content on the Dreamliner comes from suppliers in other countries, Boeing says. With the Dreamliner, however, Boeing demanded its global partners step up their commitments, requiring many to take responsibility for design work. Some of Boeing's suppliers -- as far-flung as Italy, South Carolina, Japan and Kansas -- proved "incapable" of completing the engineering work, Bair said, during his October speech to business leaders in Everett. Boeing had to take back the task from some suppliers or lend a hand to others, he said. As a result, Bair said at the time, "some of these guys we won't use again." Bair declined to name the problematic 787 suppliers. Dreamliner partner Vought Aircraft Industries has acknowledged having trouble meeting its 787 commitments. Vought's chief executive Elmer Doty even went so far as to say that his company was "among the riskiest" of the 787 suppliers. Doty said he asked Boeing for help to ramp up production of the 787 fuselage it supplies. Within weeks of taking over for Bair, new 787 program chief Pat Shanahan appointed Scott Strode, former vice president of airplane definition and production, to oversee all Boeing commercial jet programs relations with Vought. Aviation analyst Scott Hamilton, with Leeham Co., believes Bair essentially was stating the obvious: Boeing will be more selective when it names suppliers for the next jet. Hamilton further believes that Bair's statements weren't merely the musings of a discouraged ex-program leader. JSA Research's Nisbet isn't so sure. "I think it's the best way in the world of insulting their suppliers," Nisbet said. "He probably was giving his opinion rather than the company's." Hamilton suggests that Boeing placed too much trust in its supply chain. Boeing's Carson has said the company should have put its own people in supplier factories sooner. As part of his plan to keep the 787 on track, Shanahan has Boeing engineers checking the work of 787 suppliers to make sure it matches the progress reports those partners regularly give him. "I know we're on the same schedule," Shanahan said. As for Bair's comments about locating global partners closer to a central manufacturing site, Nisbet also disagrees. He notes that, despite the 6-month setback, Boeing already has enjoyed some degree of success with its worldwide assembly line. The company flies major structures from its 787 partners to Everett for final assembly. "I think they'll stick with it," Nisbet said. Boeing's rival, Airbus, has been building major aircraft structures at different sites around Europe for decades. It's a plan closer to the one Bair had implied Boeing might employ for its next jet. However, Airbus also could extend its supply chain, as Boeing did for the 787, for its A350 Extra Wide Body jet, due to enter service in 2013. The A350 will be like Boeing's 787 in its increased use of carbon-fiber composite material, making it lightweight and fuel-efficient. The Toulouse, France-based Airbus says it will use Russian, Chinese and Japanese manufacturers for its A350. Boeing's next all-new jet could be a replacement for its single-aisle 737, now built in Renton. Carson recently said the company could begin work on a new narrow body aircraft within the next 18 months. Industry observers may have to wait until then to find out how it will apply lessons learned on the 787 to its global business model. Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.

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