Summary
To walk, you have to take your first step. Boeing probably isn’t ready to walk away from WA state just yet, but the first major widebody production line outside of its traditional base with the 787 means that the labour force is indeed an expendable asset.
Analysis
Now that Boeing has committed 787 production line in Charleston, SC, the challenges in the near term are flying the first example, firming up the existing production line and strengthening the supply base to ensure final assembly sites can be fed adequately.
Amidst all this is employee recruitment and training, detailed design freeze of the 787-9 and 787-3 variants as well as balancing the rest of the BCA portfolio. On the face of it, it’s certainly a big ask, particularly as the company has repeatedly missed its own targets across the 787 program, notwithstanding the revolutionary challenges its breakthrough design has brought.
The IAM and SPEEA unions will have had time to assess the wound that’s been inflicted.
You can argue Boeing meted out the hurt, but the reality is that the WA labour pool is just as much a volatile entity as it is beneficial to building commercial airplanes.
Serious questions must now be asked of the IAM leadership – what exactly did their strike last fall “win” for their members?
If anything, the move has jeopardized the potential 737 and 777 replacements being built in the Pacific Northwest. SPEEA, which didn’t strike, is also probably wondering what steps it can take to protect its members jobs. While I can see why SPEEA director Ray Goforth says that “Boeing has chosen to compound the problems of the 787 program further,” the reality is that BCA, unlike Boeing’s Integrated Defense Systems has long needed a major overhaul that included better work distribution and diversification on virtually every operational level.
As I noted here, it’ll take at least 26 months before the first Charleston-built 787 is delivered.
Digesting the news of a second final assembly was never going to be an easy prospect for Washington State, but the fundamentals of Boeing's business philosophy has had a huge seismic change.
What’s needed is for the first line in Everett to start delivering 787s so Boeing gets paid, so suppliers get paid – because right now, the supply base can’t go beyond 7-a-month for production. There’s even less chance they’ll be able to feed two production lines based on current rates. They need revenue to grow capacity and capability and only then will the real synergies of the Global Aeronautica operation and investment in a new assembly line in Charleston be maximised - and that can only come by making the Everett 787 line work in practice as well as in theory.
But before all that, the 787 simply has to fly (this year) and get certified.
If first flight slips, Jim Albaugh’s starting tenure and veracity at BCA will be forever damaged.
Long term, the second production line is a great strategic investment, but it will be a wasted effort if tangible, visible improvements on the 787 program are not achieved by year end, such as first flight.
Investors have been keenly sat on the sidelines waiting for the 787 first flight to occur so that the expected stock rally would yield some net gains in contrast to the lacklustre moves seen so far.
The real opportunity for the 787 may not be first flight, but first delivery – since that’s where the money is.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
