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Much of 7E7 outsourced; key role for Everett

By Dominic Gates
Seattle Times aerospace reporter

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The company confirmed it will outsource 65 percent of the 7E7 airframe structure along with a large chunk of the assembly work. The final-assembly site is likely to be announced next month.

The good news locally is that, no matter where final assembly goes, the 7E7 program headquarters will be in Everett, implying some stability there but probably not new jobs.

Mike Bair, head of the 7E7 program, said that "because of the capability and expertise of our work force here," Everett would be home to a team of 7E7 design engineers and marketing people numbering "in the thousands."

A joint venture between Alenia of Italy and Vought of Texas will make more than a quarter of the airframe and assemble two-thirds of it.

7E7 assignments Boeing yesterday named its primary suppliers and said how it will build the 7E7 if its board decides next month to go ahead with the jet. Here are highlights: • As expected, Japanese companies will make about a third of the 7E7 airframe; Mitsubishi gets the wings. • Everett is 7E7 program "headquarters," meaning design, engineering and marketing — jobs numbering "in the thousands" — would remain there even if 7E7 final assembly goes elsewhere. • The only major 7E7 component to be built in the Puget Sound area will be the vertical tail fin, which will be made in Boeing's Frederickson plant south of Tacoma. • Boeing's biggest parts-manufacturing facility in Auburn will receive little or no significant 7E7 work.

Japanese industrial firms will make as much of the airframe as will Boeing — some 35 percent. This compares with a 21 percent Japanese share in the 777 jet.

Mitsubishi will design, build and assemble the 7E7 wings.

Boeing's biggest presence in 7E7 production will come from the Wichita, Kan., facility, responsible for the cockpit and a front section of the fuselage.

Boeing said that foreign outsourcing was an inevitable part of the "natural evolution" of the aviation industry.

"For us to think we can be successful in a global marketplace by keeping all the work here in the United States would be foolish," Bair said in a conference call.

Several times he compared the 7E7's business model to that of the 717 jet, built in Long Beach, Calif.

The 717, formerly the MD-95, is a legacy of the 1997 merger with McDonnell Douglas, which developed a highly outsourced business model before exiting commercial aviation.

Yet Bair contended that when the final division of labor is announced — including systems work and engine supply as well as airframe production — the 7E7's foreign content will be comparable to that in current jets.

The selection of Everett as 7E7 headquarters is a boost for Boeing engineers. Though it won't provide new jobs or relieve worries about significant design work being outsourced, it will give part of the engineering work force some job security and a sense of a future.

For factory-floor workers, the news is much more negative.

Two-thirds of the parts fabrication and assembly work done on current jet programs will, on the 7E7, go to Boeing partners — with most of that overseas.

Only the vertical tail fin will be made in the Puget Sound region. That has been assigned to the Frederickson plant near Tacoma.

The Auburn plant will get very little, if any, fabrication work.

At this stage, all that remains unallocated is "a handful of fairings and parts and bits and pieces," Bair said.

But the full impact on blue-collar workers depends on that anxiously awaited decision about the final-assembly site.

Mark Blondin, District 751 president of the Machinists union, expressed subdued disappointment at the extent of outsourcing.

"This union has done everything in its power to land both fabrication and final-assembly work on the 7E7 in Washington," said Blondin. "We believe we are a front-runner for the 7E7 final assembly and will continue to push for that.

"Our members will continue to build wings for all other Boeing models," he added.

Boeing said putting the 7E7 headquarters in Everett would have no influence on selection of the final-assembly site.

In the past, the need for close work between a new program's design and manufacturing and production teams required the engineering base and assembly line be close to each other.

But Bair said the 7E7 will be assembled from very large composite sections in a much simpler production process, so the engineering staff's location will have little impact on site selection.

"The requirement to have that liaison goes down," said Bair. "I honestly couldn't tell you which way it's going to go."

That site decision is still expected next month, though Bair raised the possibility yesterday that it may be delayed until January if his team is not ready.

Charles Bofferding, executive director of the Society of Professional Engineering Employees in Aerospace, was restrained in his reaction to Boeing's announcement.

"I'm ambivalent about this," Bofferding said. "The devil is in the details.

"For some of our people, this is good news," he added. "For a number of our people, this is bad news."

Bofferding identified production planners and engineers involved with subassembly design as potentially losing work through Boeing's shift of work to partners.

Boeing confirmed, for example, that engineers with Mitsubishi of Japan will do the detail design of the wings. That is the first time Boeing has outsourced that central technology.

Bair justified this high-tech outsourcing by stressing Boeing would retain "high-level" aspects of the work of airplane building, principally overall design architecture and the marketing of the final product.

"The wings make the airplane fly. They do provide lift," Bair said.

"But figuring out what the wings look like and how to put them on the airplane; understanding whether that's something our customers will buy; understanding how to integrate that stuff — that's the magic The Boeing Co. brings to this process."

Bair said Boeing would share its technology and expertise freely with overseas and domestic 7E7 partners.

"This is a true partnership," he said, signaling Boeing has shifted significantly toward a consortium model that in some ways resembles the operations of its bitter rival Airbus.

However, the Airbus sites in France, Germany, Spain and Britain are all part of one company. By contrast, Boeing will oversee and control a consortium of independent partners stretched across the globe.

Bair said no decision has been made on how much risk-sharing investment those partners would contribute.

"It's very important we spread some of the opportunities associated with this airplane where we see big market opportunities as well," Bair said.

But he conceded that giving work to suppliers overseas won't bring orders from those countries unless the 7E7 is right for the market.

"There is no guarantee," Bair said.

"The fact that we are building parts in Japan won't make them buy the wrong airplane."

The many local aerospace suppliers that supply Boeing will have to wait to discover the impact of yesterday's announcement on them.

"(Boeing's airframe-structure partners) will pick their suppliers," Bair said. "How this all cascades down, at this point would be sheer speculation."

Puget Sound-area firms that want 7E7 work may now have to supply a company half a world away instead of the Boeing factory up the road.

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

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