Boeing’s COO goes to Washington

The heir-apparent to run the Boeing Co. told U.S. senators last week that the aerospace manufacturer is cutting costs to stay competitive in the global market, and he highlighted how Uncle Sam helps it compete.

Demand for commercial airliners is expected to stay high in the next 20 years, but “competition with Airbus, our principal competitor, is particularly fierce, and airplane manufacturers in Canada, Brazil, Russia and China are all, in one way or another, soon to enter markets currently served by Boeing products,” Boeing Chief Operating Officer Dennis Muilenburg said during a Senate aviation subcommittee hearing on Thursday.

“Some 80 percent of our commercial airplane sales, and nearly 30 percent of our defense and space sales, are outside of the United States,” he said.

The Chicago-based company has a huge order backlog, worth $441 billion, including more than 5,000 orders for commercial airplanes worth $374 billion at list prices.

“The aviation market is broader and deeper than it was in the past, with demand being fueled by growth in China, India and other emerging markets, as well as by rapidly growing low-cost carriers and legacy carriers which want to modernize their fleets,” Muilenburg said. “Our biggest challenge is to meet this demand, regain market share from aggressive competition, and have the profitability to invest in future products. For that reason, we are increasing the production rates across our 737 and 787 lines, as well as adding new models with the 787-9 and -10, 737 MAX, and the 777x.”

To stay competitive, Boeing has to cut costs, he said.

Muilenburg thanked members of the International Association of Machinists and Aerospace Workers (IAM) in metro Puget Sound and St. Louis for approving contracts that cut the company’s labor costs.

“I cannot stress enough how important these agreements are to our collective future, or how grateful we are that members of the IAM recognize how intensely competitive the global aerospace industry has become. With agreements like these, we can and will move forward with confidence in our future as the world’s leading aerospace company,” he said.

He also noted the company’s efforts to get suppliers to cut costs.

Boeing also relies on a global supply chain to keep costs down, he said. “It comes down to this: To ensure that we continue to design and build the best commercial airplanes and aerospace systems in the world we must seek out the best technologies, material resources and skills in the world, wherever they reside. In addition, global partnering is critical to Boeing’s success in foreign markets where there is an expectation that we invest as well as sell.”

But “while 80 percent of our commercial airplanes go to airlines outside the United States, 80 percent of our supplier spend is with U.S. companies,” Muilenburg said.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.

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