Boeing CEO Dennis Muilenburg often talks about business opportunities and challenges in terms straight out of the aviation industry textbook — tailwinds and headwinds.
Tailwinds propel Boeing toward bigger profits and increased cash flow while headwinds create a drag on the company's bottom line.
With production of the 787 Dreamliner ramping up to 14 a month this spring, Muilenburg sees few forces stronger than Boeing's popular twin-aisle jet assembled in North Charleston and Everett, Wash.
"If I think about cash, cash opportunity, cash growth (the) biggest tailwind for this coming couple of years is 787 productivity," Muilenburg said last week during the Barclays Industrial Select Conference in Miami.
Boeing has chipped away at the deferred production expenses that plagued the 787's early years — such costs fell $617 million in the fourth quarter to $23 billion, down from the original $28 billion.
With 39 Dreamliner deliveries in the fourth quarter, the math works out to an average $15.8 million profit on each jet — just three years after the 787 started making, rather than losing, money on each delivery.
Muilenburg is counting on the higher production rate and lower prices from suppliers — what Boeing terms its "Partnership for Success program — to drive the program's cash flow.
The introduction last year of the 787-10, the largest Dreamliner variant, also gives the program "a favorable mix," Muilenburg said. Built exclusively in North Charleston, the "Dash 10" is nearly identical to the smaller 787-9, so production costs decrease as more of those planes are sold versus the original — and smallest — 787-8 model.
"So all of those things play into our expectations for the future," Muilenburg said.
Automation is also playing a bigger role in lowering costs. Boeing is using a "quadbot" — a robot with four computerized arms — to drill and fill thousands of holes in the 787 aft body sections. Similar machines are also helping to build wing panels on the single-aisle 737 and place 50,000 fasteners on the 777 wide-body fuselage.
"I think we're really still just at the beginning of reaping the benefits of automation in our factory systems," Muilenburg said. "And that's part of what's been driving our margin cash performance over the last couple of years. But what you see today is we've largely taken automation and we've applied it to how we've designed and built airplanes in the past."
The next wave of automation, he said, will be "end-to-end digital design."
"This is the idea of purposely designing an airplane digitally to accommodate automation," Muilenburg said. "And when you do that, the benefits of automation grow significantly."
Muilenburg succeeded James McNerney as Boeing's CEO in July 2015. At the time, the planemaker's stock price was trading for less than $150 a share. The stock price closed at $417.55 on Thursday — more than doubling Boeing's market cap under Muilenburg's tenure.
Muilenburg's predictions of profit margins in the mid-teens and annual free cash flow growth was seen as "pretty audacious" by some, according to Barclays analyst David Strauss.
"What have been the key enablers to allow the transformation we've seen?" Strauss asked Muilenburg during the conference.
"We've really been focused on how do we transform our enterprise and then make it sustainable," Muilenburg said. "We also reset our expectations ... to be aligned with being a global industrial champion. Not just the best in aerospace, as hard as that might be, but to set a higher standard in terms of financial performance, productivity and quality."
Going on four years in the job, the Boeing CEO who got his start as a summer intern doesn't see an end to the growth.
"We're not going to stop there," Muilenburg said. "We have a number of long-term initiatives that are designed not just to produce results this year, but to sustain that for the long run."