Boeing backlog may bring production increase

The Boeing Co. has a problem that every company wants and no company wants: too much work.

It will take employees seven years to work off the company’s backlog of commercial jet orders. That’s “just too much,” Jim Albaugh, president of Commercial Airplanes, said at Boeing’s investors conference Tuesday in St. Louis, which was webcast.

“It drives our good customers to go and look at other alternatives, which we don’t want them to do,” Albaugh said.

That has Boeing eyeing ways to increase production of aircraft, including the 777 and 787.

The Everett-built 777 won 200 new orders last year alone. Boeing already is working to increase 777 production from seven to 8.3 aircraft per month early next year. Albaugh believes the 777 market will continue to be “reasonably robust” in the near future, even as Boeing considers developing an upgrade, dubbed the 777X.

Jim McNerney, Boeing chief executive officer, said the company would, if necessary, consider another bump in 777 production — even if additional investment is needed.

“If the market tells us it wants, say, 10 a month, I don’t think the capital would stand in the way at all,” McNerney said.

Boeing already plans to build 10 787s monthly by the end of 2013 at the Everett and North Charleston, S.C., locations. Reaching that goal means Boeing needs to add another production line for the 787 aft fuselage section, which is made in South Carolina, Albaugh said.

Albaugh often has said Boeing can sell more 787s if the company can build the mostly composite jets faster. On Tuesday, he noted that Boeing is trying to understand what it would take to build more than 10 jets per month.

Earlier in the program, some 787 suppliers hampered production, delaying the first delivery of the 787 by three years. Boeing had to buy two suppliers in South Carolina to solve the problem. Albaugh noted there are only two Dreamliner suppliers that the company is “actively managing.” That means Boeing has “dozens” of its own employees in the suppliers’ factories, who will stay there until the company believes the suppliers can manage it alone, he said.

Across the commercial jet supply chain, including for the 787, Boeing has about 12 suppliers that the company is monitoring closely. Albaugh said Boeing would carefully reconsider sourcing additional work with those companies.

In spite of the challenges of managing the supply chain, Boeing officials are optimistic about the future of the company’s jet programs. Last year, Boeing won a $35 billion contract to supply the U.S. Air Force with aerial-refueling tankers, which are based on the Everett-built 767. With that contract in hand, Boeing sees the 767 line lasting decades.

The 737 production line in Renton will also be busy for decades to come. Boeing has booked about 450 firm orders for the updated version called the 737 MAX and has more than 500 informal commitments. Still, Albaugh said Boeing would continue to sell the 737 MAX aggressively — with hopes even of converting traditional customers of European rival Airbus that might be expected to buy the A320 new engine option aircraft.

“It hasn’t been lost on us that we need to go play in their sandbox, too,” Albaugh said.

Albaugh also projected a continued long life for the 747 jumbo jet, which was launched more than 40 years ago. Orders for the updated 747-8 passenger plane have been disappointing, but Albaugh expects the company will book more in the near future.

“We need some orders on this airplane,” Albaugh said.

Meantime, Albaugh said there is “plenty of work” for Boeing employees in South Carolina, Renton and Everett.

“What I worry about: Are we going to have space?” Albaugh said.

CEO McNerney said the Chicago-based company will work to “open up” aircraft production capacity. He hinted that the additional production capacity won’t be in the Puget Sound region, saying that Boeing needs to “diversify” risks to production so that Boeing “can satisfy our customers on an ongoing basis.”

Boeing added the 787 final assembly site in South Carolina in 2009, following a lengthy strike by members of the International Association of Machinists and Aerospace Workers (IAM) in Washington in 2008. The union and Boeing agreed early to a contract extension last year.

Asked whether Boeing plans to increase its presence in right-to-work states such as South Carolina, McNerney reiterated that Boeing needs to “diversify” further the company’s production system.

“We will keep putting money behind teams that show they can deliver,” McNerney said.

Michelle Dunlop: 425-339-3454; mdunlop@heraldnet.com.

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