787 ramp-up won't be easy, Boeing partners say

PARIS — Executives with two of Boeing's major partners on the 787 Dreamliner said Wednesday that ramping up the current snail's pace production of the hot-selling plane will cost big money and involve tricky contract negotiations with Boeing.

Boeing has an ambitious target of rolling out 10 Dreamliners per month by the end of 2012, which would likely require a second Dreamliner production line.

Even as Boeing dropped a hint such a line wouldn't necessarily be in Everett, the partner executives made clear at the Paris Air Show that getting the supply chain up to that speed will be difficult.

Kiyotaka Ichimaru, an executive at Mitsubishi Heavy Industries (MHI), which makes the 787's plastic-composite wings in Japan, said reaching 10 Dreamliners a month will require substantial new investment as well as a revamp of the assembly methods at the MHI wing plant in Nagoya.

"Just a speeding up of what we are doing" won't be sufficient, said Ichimaru, general manager of the civil aircraft and aero-engine department. "We need a drastic change in how we make some portions" of the wings.

Jeff Turner, CEO of Boeing partner Spirit AeroSystems, said there's space in his plant to make 10 a month, but the existing equipment and tooling can make only seven a month. So he, too, has to make investment decisions and reach a contract extension with Boeing.

"We think we understand the demands of that buildup," said Turner. "We have to negotiate what that higher level of production would be."

Spirit, which makes the 40-foot-long front end of the Dreamliner fuselage in Wichita, Kan., is regarded as the most successful of the 787's first-tier partners.

MHI and Spirit would have to ramp up production correspondingly if Boeing built a second assembly line.

The first line in Everett was designed to roll out only seven Dreamliners a month, and that's the production rate all the partners originally signed on for when they joined the jet program.

In an interview published on Flight International magazine's Flightblogger Web site, Pat Shanahan, Boeing's chief of airplane production, said in Paris that management is studying possible locations for a second 787 assembly line.

There are "lots of geographical options," he said. Ominously for the Puget Sound region, he implied that the Machinist strike at Boeing last fall will weigh against the Everett site.

"The real options are around 'How do you secure assurance of delivery?' " he told Flightblogger. "That's been a discussion topic around some of the disruption we've realized ... at Boeing."

But Boeing spokeswoman Mary Hanson said there's no time frame yet for making a second 787 line decision and a decision is not imminent.

The comments of the two top 787 supplier executives suggest it may take awhile.

MHI's Ichimaru said he expects serious discussion with Boeing "in the very near future" of the full cost of substantially raising production rates.

Complicating the situation, he said, MHI has started detailed design on the wing for a second, bigger Dreamliner variant, the 787-9, with significant changes from the first 787-8 wing.

And even though the final 787-8 design was set long ago, Ichimaru said, Boeing still sends in changes. The major cause for that was Boeing's effort to win Federal Aviation Administration certification of the wing's lightning protection.

To avoid electrical sparks inside the wing fuel tanks, fasteners had to be removed and turned around, and seals had to be applied. On the production line, work that had been completed had to be undone.

The lightning protection changes, the new 787-9 design, the plan to increase the rate — all of this is expensive even as little money comes in because MHI has made so few deliveries.

Expanding production would mean "we have to accumulate more investment on top of the investment we have already done," Ichimaru said. "We need to think of some way to recover that."

He said Boeing is being "creative" in interpreting the contract and trying to help.

MHI could produce two wings sets a month right now, but Boeing Everett is not ready for that pace and the current requirement is much less.

With the bottleneck at the final-assembly plant in Everett, MHI has so far shipped only nine wing sets since the first arrived in May 2007. The next ship set is likely to go in August.

Ichimaru said MHI plans to bump up its rate to between five and seven a month in gradual steps, each time adding one extra set of wings per month.

For increases beyond that, improvements are needed, including a revamp of the wing-assembly process, which is much less efficient than the heavily automated production of the giant wing panels.

Higher rates could also require a big cash outlay to buy a giant new autoclave, or high-pressure oven, or even to build a new facility.

In Wichita, Spirit AeroSystems produces its plastic fuselage sections by winding carbon-fiber tape infused with epoxy resin around enormous cylindrical molds, then baking them in an autoclave.

Spirit shut down its fuselage winding and autoclave operation for most of the past year after the Everett assembly line choked up on Dreamliner No. 1.

It is still idle today.

"It's cost us," Turner said. "We've a factory ready to produce and it went to a standstill."

He'd like to see the added revenue from pumping out more 787 fuselages, but it has to be "profitable revenue," he said.

That means managing costs, investing wisely and negotiating a realistic contract with Boeing for the extra production.

That approach has left Spirit financially well positioned in the economic downturn.

The company avoided layoffs through the 787 delays, moving workers to the 777 and 737 lines, which were ramping up.

When the Machinists strike at Boeing put those lines out of action for two months last fall, Turner put the workers on shortened weeks to avoid layoffs.

Now in the economic downturn, he faces further strain: a planned 29 percent cut in Boeing's 777 production rate in mid-2010 that will begin affecting his plant in the fourth quarter and hit it hard early next year.

Turner hopes Boeing can stick to its plan not to cut the 737 rate too. But he said he's prepared contingency plans in case it does.

He hopes more 787s rolling out will compensate at least a little for the 777 cuts.

Yet he knows a Dreamliner ramp-up can't happen fast enough to make a big difference soon.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Boeing finally gets

order at show

Boeing finally joined the orders race on the third day of the Paris Air Show, but its $153 million order Wednesday for two single-aisle planes paled beside the $6.25 billion already chalked up by European rival Airbus.

Yet even Airbus' numbers were diminutive compared with sales in past years.

Airlines and governments strapped for cash and credit appeared to have come to the world's biggest air show as tourists instead of buyers this year, admiring the high-tech hardware but hiding their checkbooks.

The vast bulk of the commercial orders have been for single-aisle planes, the cash cows of both Boeing and Airbus, which also are easier to finance.

Boeing won its first order Wednesday for two of its updated 737-800 jets from aircraft leasing company MC Aviation Partners, worth $153 million at list prices. MC Aviation Partners is a unit of Japan's Mitsubishi.

Airbus won two orders Wednesday, from Philippines-based Zest Airways and French regional airline Aigle Azur.

Zest placed a firm order for a new single-aisle Airbus A320 to further its quest to expand across Southeast Asia. The list price of the jet is about $76 million, though airlines often negotiate discounts, especially in difficult economic times.

Aigle Azur ordered one A319, its first direct purchase from Airbus. Aigle Azur serves northern Africa and cities in France. The list price for the plane is about $70 million.

— The Associated Press