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<< Previous   of   Next >> Boeing Co. photo  (click to enlarge) Work continues on 787s on the production line at Boeing's Everett plant in December. The new jet's first test flight now isn't scheduled to happen until June.   ADVERTISEMENT   Related Stories • Boeing has 'great confidence' 787 will fly on time 2/6/08   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Thursday, January 17, 2008 Local 787 suppliers take a hit Delay leaves smaller companies wondering when they'll be paid By Eric Fetters and Kaitlin Manry, Herald Writers EVERETT -- The Boeing Co.'s latest delay for the inaugural flight and first delivery of the 787 Dreamliner will have a ripple effect on the long list of suppliers making parts for the new jet. Many of the second- and third-tier suppliers for the Dreamliner, including a number of companies in Snohomish County, have contracts that don't pay until the first 787 is certified as flight- worthy and ready for delivery. As that projected date has slipped, however, Boeing and some of its suppliers may have to come to a new understanding. "Boeing's obviously going to have to renegotiate with its suppliers because some don't have the financial wherewithal to keep waiting," said aerospace analyst Scott Hamilton of Leeham Co. Boeing confirmed Wednesday its newest jet will be delayed for three more months, pushing delivery of the first plane into early next year. Originally, Boeing had hoped to fly the 787 for the first time last summer or fall and deliver the first plane to All Nippon Airways of Japan by springtime of this year. Then both those events were delayed twice. With the third delay announced Wednesday, test flights won't begin until late June. Boeing officials wouldn't be pinned down as to when in early 2009 the first delivery will happen. Scott Carson, chief executive of Boeing Commercial Airplanes, said it is clear, however, that the company won't be able to meet its goal of delivering 109 Dreamliners during 2009. In Snohomish County, a handful of companies are making or machining parts for the 787, including Goodrich Corp. The North Carolina-based company opened a facility in Everett less than two years ago to build and install engine parts for the 787. It's unclear how the delays will affect those workers, said Goodrich spokeswoman Laurie Tardif. "We are working very closely with Boeing to assess any impact on that, and really that is all the information we have at this time," Tardif said Wednesday. Other local suppliers had less to say. A spokesman at Damar Machine in Monroe declined to comment on any potential impact. At the Everett office of Messier-Dowty, which is providing landing-gear parts for the new jet, a spokesman referred calls to the French company's headquarters in Paris. John Monroe, director of aerospace programs for the Snohomish County Economic Development Council, said some suppliers have invested millions of dollars into building production lines. They now face not seeing payments from Boeing until next year. "For a lot of small companies, that can be quite a hit," Monroe said. Boeing spokeswoman Yvonne Leach said the company isn't ignoring how delays could hurt those companies. "We are in the process of working through what the impact is with our suppliers. We don't have any total conclusions yet," she said. "We have to do it supplier by supplier, and it takes a little while to figure it out. But we are going to work out some kind of schedule with them." Hamilton predicted Boeing will rework supplier contracts so that some of them get paid before the first 787 takes to the air. For the Boeing workers in charge of assembling the 787, delays have brought about more work. Workers assigned to the jetliner program skipped the extended holiday break most Boeing workers enjoy annually. More people have been added to the program as well. The Machinists union sees the latest delay as more proof that Boeing needs to rethink its "worldwide assembly line" approach. "The Boeing Co. has decided to sublet it out and they've lost control of the product," said Tom Wroblewski, president of the International Association of Machinists and Aerospace Workers' local district. "They're relying on our members to pull them through to make the 787." Airplane panels that were supposed to be wired and installed with plumbing systems in other countries are instead arriving at the Everett assembly plant without those assemblies. Local Machinists are scrambling to create plans and do the work contractors didn't, Wroblewski said. "Boeing has to learn from its mistakes," he said. "This is the skilled work force. We know how to do it." Also unknown is how the 53 airlines that have ordered a record number of Dreamliners -- 817 in all -- will react to delivery delays. Analysts on Wednesday suggested Boeing will face penalty payments of up to a few million dollars for each plane that isn't delivered on time, raising the punishment price to at least $1 billion. At list prices, the 787 order is valued at $110 billion, although discounts are routine. Analysts said the delay will certainly not help the company's stock. After dropping 5 percent on Tuesday, the stock rose 2.6 percent, or $2.01, on Wednesday, closing at $79.87 Because Boeing has won so many orders, the financial hit it takes from delays could rival what Airbus had to pay after its A380 superjumbo jet was delayed. "It's not there just yet," Hamilton said. "But I don't think we're that far away from that, either."

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