Boeing: We’re willing to work with a union CEO says company expects to turn profit on 787 this year

Boeing Co. would be willing to work with a union in South Carolina if the employees choose to organize, the planemaker’s top executive said Wednesday.

CEO Jim McNerney’s comments came less than a week after the International Association of Machinists withdrew its petition for a union election at the company’s 787 Dreamliner production facilities in North Charleston.

McNerney made the statement during a conference call in which Boeing reported it is on track to turn a profit on its 787 program before the end of this year.

Boeing’s plants in North Charleston and Everett, Wash., are the only factories that make the Dreamliner.

The program, which launched in 2011, has been a drain on finances as the company works through development and production issues, most recently a supplier’s inability to deliver enough seats for the airplane. McNerney said the seat problems probably won’t be fully resolved until the end of the second quarter.

Boeing expects to start chipping away at $27 billion in deferred costs for the Dreamliner when production ramps up to 12 per month in 2016. Before that happens, though, the company expects to defer another $1.6 billion in costs through the third quarter until the program turns cash positive in the following quarter.

Wednesday’s conference call with analysts came on the same day that North Charleston workers were supposed to vote on whether to be represented by the IAM in collective bargaining. The union pulled its petition Friday but has vowed to regroup for another vote, possibly in six months.

McNerney did not address a question about whether the North Charleston facilities need to remain nonunion in order to be competitive. He did say that Boeing wants a good relationship with all employees, whether or not they are union members.

“We are very happy with our relationship with our teammates down in South Carolina,” McNerney said. “The site is technically, and on a manufacturing, certification and engineering basis, doing very well. I’m very pleased with its progress.

“But I also highly value the relationship that we all have with our employees in Puget Sound,” he added, referring to Boeing workers in Washington state who are covered by labor agreements negotiated by the IAM.

“One group has a union and one doesn’t,” McNerney said. “We prefer to have a direct relationship with our employees. But when they choose to have a union, we want to work with them. So, it’s not either/or. Our task is to work with both environments and to grow them to their potential.”

McNerney said he is “very happy with developments down in South Carolina. That place is really doing well.”

Boeing delivered 30 of its Dreamliners during the first quarter of this year, including 21 built in Everett and nine built in North Charleston, according to statistics from the blog “All Things 787.”

The aerospace giant has taken 34 net orders for 787s this year, including orders for three of the 787-10 model from Tokyo-based All Nippon Airways. The 787-10, the longest Dreamliner version which will be 25 percent to 30 percent more efficient than the airplanes it replaces, will be built exclusively in North Charleston, with the first delivery scheduled for 2018.

Boeing said the per-unit cost for its 787-8 model has declined 30 percent over the last 190 deliveries while the per-unit cost for the longer and more fuel-efficient 787-9 has dropped 25 percent over the last 20 deliveries.

“We’re coming down the learning curve in a very aggressive manner,” Boeing finance chief Greg Smith said of 787-9 production. “And I think that goes to the lessons learned off the 787-8 in getting those into the production system. So the introduction of that airplane is going very well. And as you know, that will be close to half of our (Dreamliner) deliveries this year. So that smooth introduction is important.”

Smith said the 787 program “continues to make good improvements on unit costs (but) we still have a long way to go.”

Overall, Boeing delivered more commercial planes in the first quarter, offsetting sluggish results in the defense side of its business and pushing its first-quarter earnings up 38 percent.

The profit topped Wall Street expectations, but revenue — which rose 8 percent to $22.15 billion — was below forecasts.

Boeing’s commercial planes business is soaring as airlines use some of their record profits to buy new, more fuel-efficient jets. Company executives have recently brushed aside concern that falling oil prices could undercut demand for new jets from Boeing and European rival Airbus.

Boeing delivered 184 airplanes in the quarter, up from 161 in the same period last year, with two-thirds of them for the venerable 737 jet, a workhorse on short and midrange routes around the world.

Meanwhile, orders minus cancellations rose by a net of 110 in the quarter, and Boeing now has 5,700 orders on its books. About half are for an upcoming version of the 737. The eight-year production backlog is valued at $495 billion.

The Associated Press contributed to this report. Reach David Wren at 937-5550 or on Twitter at @David_Wren_