Wednesday, March 28, 2018

Boeing faces slowdown in 737 fuselage deliveries from Spirit AeroSystems

Boeing has been hit by a slowdown in deliveries of 737 fuselages from Spirit AeroSystems in Wichita, Kansas.

Although Boeing says it’s a short-term problem, the supply-chain glitch is threatening to stem, at least temporarily, the flow of cash it derives from the normally super-productive 737 program.

According to one Boeing worker who makes parts for the 737 in the Puget Sound region, “We’ve got 10 airplanes’ worth of product we can’t ship to Renton because of the fuselage shortages from Spirit.”

Boeing spokesman Doug Alder conceded that fuselage deliveries have been slowed but he said, so far, customer deliveries have not been affected.

“Boeing is working closely with Spirit as they track toward a full recovery in the next couple of weeks,” Alder said in a brief statement. “We have a plan in place to mitigate the issue in our factory so that airplane deliveries to our customers remain on schedule.”

The slowdown affects the complete fuselages that are delivered on rail cars daily from Wichita to Renton, where Boeing attaches the wings and installs all the airplane systems as well as the cabin interiors.

At the current production rate of 47 airplane deliveries per month, more than two jets roll out every working day from the Renton assembly plant, requiring a steady supply of those fuselages from Spirit.

Two weeks ago, the plant rolled out the 10,000th 737. And last year, about 42 percent of Boeing’s commercial-airplane-sales revenue came from the 737 program.

Spirit spokesman Fred Malley said the company has had problems in getting some parts from sub-tier suppliers.

“Spirit is focused on meeting increasing customer demand and higher production rates for the 737 program,” Malley said via email. “While we have had some challenges with some components, we are working closely with our customers and partners to meet commitments.”

More direct remarks by Spirit Chief Executive Tom Gentile almost two weeks ago at a JP Morgan industrial conference suggest the fuselage-delivery slowdown stems from problems in the company’s sub-tier supply chain.

In a question-and-answer session then, Gentile said supply-chain issues had caused disruption and higher costs in the fourth quarter of last year as more new-model 737 MAX fuselages came through the system at the same time as production was ramped up from 42 jets per month to 47 per month.

For that quarter, Spirit recorded a $21.7 million hit to pretax earnings attributed to higher costs on the 737 program.

Gentile said the supply-chain problems continued into the first months of this year.

“There’s tens of thousands of different parts that we put together for the 737. And we have 600 major suppliers, and it’s fair to say that the suppliers experience some difficulty going up in rate,” he told investors at the conference. “We’ll still see some stress in the first quarter, as we work our way through that.”

Now as the end of the first quarter approaches, that stress is appearing at the Boeing terminus of the supply chain.

Gentile said Spirit has identified the problematic suppliers, though he didn’t name them, and has sent out teams headed by executives to help fix their issues.

“We’ve put SWAT teams out at more than a dozen of the suppliers,” Gentile said. “In the case of all the suppliers that have been behind, we have action plans. We will review those on a daily basis. I see them at least weekly. I talk regularly with the CEOs of those companies.”

“We feel we’re getting on top of it,” Gentile summarized.

(Dominic Gates - The Seattle Times)

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