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Texas courts key Boeing supplier to win big 7E7 role

By Dominic Gates
Seattle Times aerospace reporter

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Texas wants to eat some of Washington's lunch. The Lone Star state is pressing hard to win partial assembly of Boeing's 7E7.

Though Texas lost out in the competition for final assembly of the new airplane, the state is seeking to expand its role beyond building large pieces of the jet to fitting together and integrating most of the rear section.

Giorgio Zappa, chairman and chief executive of key 7E7 supplier Alenia Aeronautica of Italy, said yesterday a "pre-final assembly plant" could be placed in Texas, rather than beside the final-assembly plant in Everett.

The proposed pre-assembly plant would be a joint venture between Alenia and Dallas-based Vought, a factory where the large 7E7 substructures produced by the two companies would be pieced together and stuffed with systems before delivery to Boeing.

In a phone interview from Austin, Texas, Zappa stressed nothing has been decided and expressed hope the initial contract with Boeing could be finalized this month.

"First it is necessary to conclude the negotiations with Boeing about our role on the 7E7, then we'll decide if it is convenient to create a pre-assembly line," Zappa said. "Then, if the answer is yes, (we'll decide) where it is better to imagine the pre-assembly line.

"Texas will be one important state where it is possible to do this," Zappa said, adding that other states, including Washington, will be considered.

Zappa is to meet today in Austin with Tom Risley, chief executive of Vought, and Texas Gov. Rick Perry.

The meeting follows a trip by Perry and Risley to Italy two weeks ago, during which the governor met with Zappa and with Prime Minister Silvio Berlusconi.

Perry discussed "opportunities for creating new jobs in Texas by expanding existing relationships between Alenia and Vought on the 7E7 airplane program," said a statement from the governor's office.
 
Zappa spent Wednesday in Washington, D.C., at a daylong convention to promote joint U.S. and Italian aerospace ventures. Members of the Italian government, as well as executives of Alenia, mingled with Pentagon officials, members of Congress and industry representatives, including Boeing Chief Executive Harry Stonecipher.

But the focus in Washington was mainly on defense projects. Alenia hopes to sell to the U.S. military its C-27J military cargo jet, produced in a joint venture with Lockheed Martin.

Perry's efforts to woo Alenia also include the goal of transferring more C-27J production work to Texas.

On the commercial-aviation side, an Alenia insider said Texas has not yet offered any specific incentives to win the 7E7 pre-assembly work.

But in February, Vought said it would consolidate its operations in Dallas, closing plants in Florida and Tennessee and shifting work to Texas with the aid of a $35 million state grant, administered by Perry's office.

The grant was made with the expectation Vought would create 3,000 jobs in Texas by 2009.

Vought spokeswoman Lynne Warne said the company plans to "take on new commercial and military work" to meet that requirement.

Last year, Boeing gave Vought the assignment of designing and producing the 7E7's rear fuselage section, behind the wing. Alenia is responsible for the upper-central fuselage above the wing as well as the horizontal stabilizer on the tail.

Together, that's 26 percent of the airframe. But integrating those parts is a substantial piece of additional work.

To satisfy Boeing's desire that its suppliers deliver large completed structures, the two companies propose a joint venture that would assemble their pieces together and then integrate them by pre-installing some major systems.

Previously, it seemed likely the pre-assembly work would be done in Everett to make final assembly more efficient.

Auto manufacturers — including Toyota, Boeing's model for lean production — have pioneered a strategy of clustering suppliers around main final-assembly plants.

But air freighting from Texas large assemblies stuffed with sensitive systems could be problematic. With the horizontal stabilizer attached, a rear 7E7 fuselage would not fit inside even the converted 747 superfreighter jets Boeing proposes to transport 7E7 structures.

Choosing Texas for pre-assembly work would mean the tail would have to go on later.

But money can always trump manufacturing ideals, said one industry expert, who pointed to the success of Texas in persuading Vought to abandon two other states and consolidate work in Dallas.

"For a state with free-market talk, they actually have a very interventionist walk," said Richard Aboulafia, an analyst with the Teal Group.

"Sweeteners negate geography," he added. "I tend to think that if Texas wants it, they'll take it."

Robert Black, a spokesman for Perry, would not discuss possible further incentives Texas might offer to Alenia or Vought.

"We'll certainly be talking to them in a very persuasive manner," Black said.

Martha Choe, 7E7 project coordinator for Washington , said the state is marketing both Everett and Moses Lake as possible locations for 7E7 supplier facilities.

Everett is the obvious choice, Choe said, citing the proximity to final assembly.

The state granted $3.2 billion in tax breaks and other incentives to win the 7E7 final-assembly plant for Everett.

Many of those apply to suppliers as well as Boeing.

Choe said the state is working closely with Boeing but has no specific plans to do what Texas has done and woo major 7E7 suppliers directly.

"We'll track the competition very closely and look at that option," Choe said. "We're developing plans on how we aggressively recruit those suppliers."

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

Orders reported for 14 jets worth total of $800 million

CHICAGO — Boeing received orders worth about a total of $800 million for 12 737 models and two 777s.

The orders, listed on Boeing's Web site, came from a customer or customers that weren't identified. Chicago-based Boeing updates orders weekly on the site.

The value of the orders is based on the low end of the company's catalog prices, which don't include discounts often given to customers.

Boeing spokesman Todd Blecher declined to comment.

Separately, Boeing said yesterday it delivered 76 commercial airplanes to customers in the first quarter, up slightly from 71 deliveries in the first quarter of 2003.

For the three months ended March 31, Boeing said the bulk of the deliveries — 55 — were of its popular 737 airplanes.

The company has said it expects to deliver about 285 airplanes this year and in 2005. That's just slightly more than the 281 airplanes the company delivered in 2003.

— Seattle Times wire services

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