Boeing executives praise S.C. plant, challenge suppliers, rival
After a rainy start to Boeing’s annual investor conference this week, the clouds cleared in time for the company’s leadership to deliver a blue-sky report to match the Lowcountry weather.
The slides that accompanied the executive presentations can be seen here:http://tinyurl.com/pa2yc3b
Speaking Wednesday to a collection of out-of-town analysts on Kiawah Island, top executives lauded the North Charleston 787 complex and revealed new details about the upcoming 777X while firing shots at Boeing’s legacy home base and suppliers as well as at its main rival, Airbus.
CEO Jim McNerney said the Chicago-based aerospace giant is “quite proud of what our people have accomplished right here in South Carolina,” and was glad for the opportunity to show off the local operation during the first part of the conference Tuesday.
“It’s a big deal,” he said, saying the 2-year-old final-assembly building was the first new commercial airplane factory built in the United States in a half-century. “It took a long time, but we’re on the other side now.”
Hammering the point home, commercial airplanes chief Ray Conner called the 6,000-worker operation in North Charleston “truly a remarkable story,” and finance chief Greg Smith called Boeing South Carolina “clearly a very important element of our business going forward.”
Conner said the local plant has seen a 45 percent reduced cost per job, compared with 39 percent at the other 787 factories in Everett, Wash., and he reserved special praise for the previously problematic aft- and mid-body factories for incorporating the 787-9 stretch Dreamliner into the production system.
“That place is starting to really hum,” he said.
McNerney said Boeing South Carolina is not only helping reduce the 800-jet 787 order backlog, but represents “choice” when the company decides where to place future work, like the upcoming 787-10 double-stretch Dreamliner and the 777X.
“Now that we have internal competition, we’re going to get much better deals — much better deals,” he said, an apparent nod to the government and unions in Boeing’s historic plane-making hub near Seattle and the $120 million incentives package South Carolina approved last month.
McNerney touted Boeing’s new “Partnering for Success” program that aims to cut supply-chain costs, especially on the long-delayed and over-budget 787 program.
He said Boeing has “no-fly lists” of problem suppliers and has sent letters to some “telling them not to bother” bidding on future work, a step Boeing hasn’t taken before.
“Don’t bet against Boeing,” he advised. “Let’s win together.”
Turning figuratively to the east, McNerney boldly predicted wins in Boeing’s ongoing competition with European rival Airbus for the lucrative wide-body airplane market.
While Airbus is expected to fly its vaunted A350 for the first time this summer, Boeing is preparing to launch the re-engined, re-winged 777 and the longest 787 derivative.
“We’re about five years ahead of them, and we’re going to bracket them,” McNerney said, before Conner later unveiled the approximately 350-seat 777-8X and approximately 400-seat 777-9X. “Not only will we have more entrants, we’ll be above and below them.”
Ten 787s per month
McNerney said the 777X and the 787-10 will launch this year, and customer interest is “high and growing.” Both are derivative programs that fit Boeing’s plan to assume less risk this decade than it did with the baseline 787, which ran years behind schedule.
Ten 787s per month
Those planes also are part of what McNerney called a “long-term bull market” in commercial airplanes where the growth opportunity is “simply unprecedented.” Boeing already has a record backlog of some 4,400 airplane orders worth $324 billion.
Because of that opportunity, McNerney said Boeing is considering making even more 787s and 737s than has been forecast in production-rate increases so far.
Boeing makes seven 787s per month now, and plans to be making 10 per month by the end of this year, while the 737 rate is scheduled to go from 38 per month now to 42 per month next year.
“We are examining in great detail right now upward bias in those two programs,” McNerney said, adding that no decision has been made, “but it’s available to us.”
Boeing didn’t say ahead of time where the conference was, but analyst reports published last week noted that it would be in Charleston.
At the beginning of the morning session, Boeing’s vice president of investor relations offered a further hint, identifying the setting of the presentations as the Grand Oaks Ballroom and the Heron Room, which are the names of meeting spaces at The Sanctuary Hotel, a high-end destination on Kiawah Island.
McNerney joked at the beginning of his remarks that the gathering was not actually in Charleston.
“As Mike Luttig told me, this is Kiawah,” McNerney said, referring to Boeing’s general counsel who has vacation property on the barrier island.
Spokesmen for Boeing and the hotel declined to confirm any aspect of this week’s conference.
The two-day conference came at an exciting time for Boeing and its South Carolina plant.
After a three-month grounding due to a battery problem, 787 test flights and some commercial flights have resumed. Last month, Boeing announced a major expansion in South Carolina boosted by a government incentive package, the second part of which the Charleston County Council approved unanimously Tuesday night.
Conner said devising a fix for the mysterious battery malfunction “posed a significant challenge for us,” but that the last of the battery retrofits should be done next week.
Conner conceded the 787 program has learned some “painful lessons” in recent years, but now has its eyes skyward.
“We’re set to take off in the next couple of years,” he said.