Boeing’s ‘Partnering for Success’ Terms Squeezing UTAS

 - October 27, 2017, 11:30 AM

One reason why Héroux-Devtek, headquartered in Québec, won the Boeing 777X landing gear manufacturing contract in 2013 and the renewed 777-300ER gear contract was that then-incumbent 777-300ER gear manufacturer United Technologies Aerospace Systems (UTAS) declined to bid for them, according to United Technologies CEO Greg Hayes.

Responding to financial analysts’ questions during UTC’s third-quarter earnings conference call on October 24, Hayes said that the terms of Boeing’s two Partnering For Success (PFS) programs aimed at getting vendors to reduce their costs sharply and agree to more onerous terms and conditions proved too unattractive for UTAS to want to bid at all for the 777X gear contract.

“The focus from the OEMs to reduce cost is never ever ending,” said Hayes. “We saw it with PFS 1. We’ve been talking to Boeing about PFS 2. And the fact is, we recognize we have to continue to take cost out of our product if we want to be competitive, and we've told both Boeing and Airbus we’ll continue to work with them to find ways to do that across all of the portfolio. But this is not going to end, right.

“The landing gear was a particularly difficult discussion,” he added. “We’ve been making the 777 landing gear for a very, very long time. Boeing asked for a large price reduction, which we could not accommodate, which would have ended up us losing money on a product with no aftermarket.”

Hayes disagreed with an analyst who asserted Boeing doesn’t like the forthcoming merger between UTAS and Rockwell Collins because the airframer might not see any benefits from the new combination and questioned whether Boeing saw any from the previous merger between UTC subsidiary Hamilton Sundstrand and Goodrich to create UTAS.

“PFS 1…was a significant concession on the part of our Aerospace Systems business to take cost out, to reduce the cost to Boeing on the 787,” said Hayes. “And it was a big bite at the apple, I would tell you. And we have been working, as you know, to try and cover some of those costs. The problem at UTAS today of course is, we don't make any money on any product that we sell to the Boeing Company. None. In fact, we lose money.

“I would tell you, Boeing got a benefit from the acquisition,” insisted Hayes. “And look, we’re six to nine to 12 months away from closing on the Rockwell Collins deal, so I can't comment specifically on where the savings will come from…But one of the things that we’re going to commit to the airlines and to the airframers is, we will provide value to you guys because of this.”


The Last Inspector's picture

This Boeing PFS system is yet another way Boeing ensures suppliers cut corners on QA, so they can maybe eke out a profit on their Boeing contracts. Another method is Boeing intentionally not auditing these suppliers' QA systems as they are required to by the FAA. This relentless cost pressure by Boeing as Boeing's obvious carelessness about fulfilling any FAA requirements such as supplier audits ensures that Boeing's suppliers' QA systems are just as corrupt as Boeing's own system. I've worked both at Boeing and some of their suppliers as an inspector, and the rollerstamping and other fraud in QA systems at both is just as rampant. QA fraud is a key way that Boeing further cuts costs to its bottom line in order to pump up management's stock option values. It has succeeded in pumping up the stock value over ten times what it is worth, but how many more people will die in Boeing plane crashes because of this fraud is unknowable. Protect yourself. Never fly Boeing.