Boeing has sent more of its personnel to engine supplier CFM to give the Chicago-based airplane maker more precise insight into what so-called long-lead items continue to slow delivery of Leap-1B engines for the 737 Max program, according to Boeing CEO Dennis Muilenburg. Speaking during Boeing’s fourth-quarter earnings call, in which the company announced record revenues, profits, and deliveries for the period, Muilenburg singled out CFM as one of the last suppliers with which the airframer needs to work to “synchronize” workflow before executing on a planned production rate increase to 57 per month this year.
“We still have work to do to get CFM to be supporting our 52-a-month production rate and having those systems synchronized; and even more work to do to get them to 57 a month,” said Muilenburg. “By us getting deeper into their factories, it’s going to give us better insights on long-lead items and frankly to help us do best practice sharing between Boeing and them, which is part of how we operate.”
Muilenburg added that the company’s overall delivery guidance—it expects to deliver a total of 900 airplanes this year—reflects a sharp focus on the CFM issue during the first quarter. “We’re going to be very, very disciplined about ensuring supply chain health before we fully move to the 57-a-month production rate.”
In fact, Boeing expects this year’s first quarter to account for the least number of deliveries of any quarter in 2019, and January the lightest month of all, reported Muilenburg. Meanwhile, whether Boeing can again achieve a 1:1 book-to-bill ratio looks less likely in 2019, following a year in which it took net orders for 893 airplanes while delivering 806. The Boeing chief executive called the expected “moderation” of orders a natural effect of local decision timing as, for example, China prepares to execute on its next five-year economic plan.
“In terms of orders volume in China, that’s typically paced by the timing of their five-year planning, so it tends to come in waves. So that’s why we expect to see some timing adjustments on orders. But overall volume over the long term remains very strong,” explained Muilenburg. “This also factors into some of the trade dialogue between the U.S. and China...Again, we see China as a long-term growth market for us, but exactly how those efforts play out over the next quarter or two is still an open question as we proceed with trade discussions.”
Meanwhile, whether or not efforts related to new programs culminate in the launch of the so-called NMA, or new midsize airplane, remains a question Boeing hasn’t yet committed to answering in the next quarter or two. However, in order to “protect” a 2025 desired entry into service, the company will need to issue so-called authority to offer some time this year as it targets an industrial launch in 2020, reported Muilenburg.
“It’s clear that there’s a market need, but we’re working through the details of the business case,” he said. “We’re going to be very disciplined on how we do that. While we’re making progress, we’re not up to our decision point yet.”