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Shanahan Ponders Prospects For Further 787 Rate Hikes

 - June 17, 2013, 12:20 AM
Plans call for Boeing’s new 787 factory in Charleston, South Carolina, to produce three airplanes a month by the end of the year.

Boeing has left little doubt that it harbors bigger plans for its new plant in Charleston, South Carolina, where by the end of this year it expects to deliver three Dreamliners a month. While reviewing scenarios for 787 production rate increases and future programs during a briefing to reporters late last month at Boeing’s narrowbody facilities in Renton, Washington, Boeing Commercial Airplanes senior vice president and general manager for airplane programs Pat Shanahan said he would bet that the Charleston factory would contribute significantly to filling the capacity needs the eventual launch and production “ramp up” of the 787-10 would undoubtedly generate. Singapore Airlines became the first to commit to the 787-10 with a conditional order for 30 in late May.

“If you launch the -10 and you sell it, you have to make the assumption you’re sold out for quite a long period of time,” said Shanahan. “That means you’ll have to either de-book -9s or -8s, or increase the production rate. My guess is we’ll increase production and not substitute out other models.”

Boeing (Chalet A324, B321) still expects to raise the 787-8 production rate to 10 per month–seven at the main widebody plant in Everett, Washington, and three in South Carolina–by the end of this year.

At the same time, it plans to build four 787-9s for flight testing. That, along with talk of rates increasing beyond the 10-per-month level, has raised questions about Boeing’s ability to close a third, so-called surge line in Everett, opened last year as a means to add temporary capacity and launch production of the 787-9.

Shanahan insisted Boeing hasn’t changed its plans to decommission the surge line, however, despite what could prove to become a capacity squeeze with the almost certain launch of the 787-10.

“I feel really confident that you’ll see the surge line go away, and earlier, not later,” said Shanahan. “So…that’s the bet I would make, because we’d like to have the space.”

What Boeing plans to do with the space remains an open question, but the work now done on the surge line appears likely to go to Charleston, where enough capacity exists already to build seven Dreamliners a month. “That would be my bet,” said Shanahan. “We can do seven on the one line [in Everett], and we can do seven down in Charleston. Might we be able to do something that’s a little bit more weighted one towards the other? We’ve got to see how Charleston performs.”

Shanahan emphasized the importance of raising production in a disciplined manner so as to avoid placing stress on a supply chain, certain members of which haven’t performed up to CEO Jim McNerney’s standards. Therefore, he said, Boeing won’t rush the -10X to the market despite a level of urgency expressed to do so by Singapore Airlines and interest by “more than a handful” of airlines.

During an investors’ conference last month on Kiawah Island, South Carolina, McNerney talked of a “no-fly list,” on which suppliers can find themselves if they don’t meet certain performance or cost criteria set by Boeing. Any company on the list won’t get the chance to bid on future programs, perhaps most notably the 777X. Boeing has already moved to mitigate supply-chain “risk” by creating in-house capacity such as that in Charleston.

In Renton, Shanahan elaborated on what appears to be a concerted effort to foster a more collaborative relationship between Boeing and its suppliers.

“If you’re doing the development work and there is risk you would expect everyone to share in that,” said Shanahan. “I think what [McNerney] said was that there’s a disproportionate exposure to risk.

“We have some great partnerships. There are some that are real high performers…There are some others that really need to step up their game…If you look at performance, some overcharge, some overpromise and some don’t deliver the quality that we need…Many of the suppliers will say, look, we want to be working in Philadelphia on the V-22, and we want to be working on the 737, and what Jim is telling them is, look, if you’re not doing the right work, [and] you’re not performing on the V-22, don’t come talking to us about the 737.”