Boeing cements its hold on Charleston 787 complex

Boeing said Tuesday it had bought out the remaining interest in the Global Aeronautica fuselage subassembly plant in North Charleston, S.C., bringing more of the 787 Dreamliner's operations under its direct control.

Boeing purchased Alenia North America's half-interest in the plant for an undisclosed sum. It's the company's third purchase related to 787 production in less than two years.

"This tidies up the situation in Charleston" and suggests Boeing is starting to resolve claims with suppliers over 787 delays, Macquarie Capital analyst Rob Stallard wrote in a note to clients.

He estimated the direct cost may have been in the neighborhood of $50 million, but added, "We expect many of the Alenia claims to have been resolved by revising work packages on other Boeing programs, and so the cost of this compensation is likely to have been booked elsewhere, and not against the 787 program."

Jim Albaugh, CEO of Boeing Commercial Airplanes, called the Charleston site "critical to the success of the 787 program" and said Boeing's acquisition "will increase productivity for the 787 program and allow us to maintain our long-term competitiveness."

Shares of Boeing rose 1.5 percent to $55.10. In the past 52 weeks, the stock is up 32 percent but still at half its peak price in 2007. Investors are worried about potential delivery cancellations next year in the wake of the recession and declining air traffic.

"This is definitely a good move for Boeing," said Nathan Smith, an aerospace analyst with the research firm Frost & Sullivan. "With 70 percent of the aircraft outsourced, spread out over 20 different countries, it's been a supply-chain nightmare."

The supply chain was intended to spread out costs among more than 100 subcontractors, but it's led to a variety of problems including a shortage of fasteners, mismatched parts and incomplete software.

In the end, Boeing likely spent more money on the 787's development than it would have under a traditional model, Smith said.

Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace, which represents 24,000 workers at Boeing, said in a statement that "rather than saving money, Boeing's become the reinsurer of its supply chain and has in fact had to buy outright or loan money to different suppliers to keep its outsourcing model from failing."

Global Aeronautica was formed in 2004 as a 50-50 joint venture between Alenia North America and Vought Aircraft Industries to support the 787. Boeing acquired Vought's interest in Global Aeronautica in March 2008.

In July, Boeing also purchased Vought's South Carolina facility for building fuselage components, at a cost of about $1 billion.

And in October, Boeing said it would build its second 787 final-assembly line and delivery center on land adjacent to the existing plants.

Acquiring the facilities better positions the 787 program for production ramp-up and enables Boeing to further streamline productivity and make efficiency improvements throughout its supply chain, according to company spokesman Jim Proulx.

Global Aeronautica employs about 1,600 employees, including contract labor. Boeing said it will maintain an appropriate level of employment but added it didn't anticipate a significant change in the near term.

Information from Seattle Times aerospace reporter Dominic Gates and Bloomberg News is included in this report.