No panic in 787 supply chain

Implications: Tier I/II suppliers and subcontractors to Boeing on the 787 are reacting to the current strike's implications by variously revising guidance, cutting back on worksheets, temporarily laying-off workers or rescheduling rotas. What they are not doing, is panicking.

Analysis: Before the Boeing strike, there were probably some 10,000 people working directly and indirectly at other Tier I & II manufacturers and suppliers around the world (Australia, Canada, Japan, Europe, US etc) on 787 pre-production. Employment levels have risen steadily over the past 18 months as pre-production accelerated slowly in the face of recurring delays. As far back as end-2005 Boeing was already looking at a 787 engineering payroll of 4,000+.

These people are not all idle today, either at Boeing worldwide or within the supply chain. In fact, the striking Boeing workforce is put at around 28,300 according to informed sources (although one error-prone WA pundit actually managed to suggest last week that all of Boeing was on strike... all 165,000, plus subsidiaries... Dear, dear.).

Despite the continued uninformed and hyperbolic baloney of much of the general media (my current favorite is, "No talks scheduled as Boeing machinists enter fourth week of strike" which appeared just 17 days after the strike began -- and I thought the French had a funny working 'week', unless of course the Wichita Business Journal is, er, exaggerating...), there is as yet no panic in the global supply chain.

Companies such as Tier II integrator Primus International, which makes parts like engine cowl assemblies, naturally are affected by the stalled production build-up and have taken the step, as the article indicates, of adjusting output to demand.

It's that simple -- you adjust. If your company is entirely dependent on any one program, you're in trouble whether or not there's a strike (compare this to the European-based situation where virtually the entire A350 supply-chain has been shunted years to the right while A380 subcontractors have now faced four main delay-induced production-rate cuts with no likelihood of an early improvement either).

Strikes end, supply chains restart. It's all a question of the longer-term, and with 903 787 orders as of today, the Boeing supply-chain knows there's a revenue stream out there just waiting to flow. It's all a question of getting there from here without committing financial suicide along the way.

How long will the strike last? Nobody knows, although there's no shortage of guesswork with such advanced in-depth analysis as, "I think it will be a long strike," seeming to be the lowest common denominator among the instant-expert/talking-head ranks.

Industry bosses, whether at Tier I, Tier II or OEM level, aren't into guesswork. People like Primus are less diverted by today's headlines and more focused on this year's and next year's balance-sheet.

As is Boeing.