Key supplier says engine makers unsure of Boeing ramp up plans

A key supplier says engine makers aren’t as positive about plans by Boeing to ramp up production.

Allegheny Technologies hosted an investors’ day last month. In a note issued September 14 by Buckingham Research Group, BRG wites:

ATI has confidence in BA’s production ramp schedule but believes engine manufacturers do not. ATI is confident BA will achieve 787 production rates of 10/mo at the end of 2013 and successful ramp on the 737 and 777. Although ATI has faith in BA’s production ramp, CEO Richard Harshman noted that the engine supply chain may not have the same faith in BA’s production ramp. ATI’s observation is that the engine supply chain is being very tightly managed and that engine OEMs are being very guarded about getting ahead of airframe manufacturers (historically they have gotten ahead, anticipating production increase). This somewhat supports our view; although we think execution on the 787 has been better than BA expected, we think BA will be challenged to meet its production rate schedule of 10/mo by the end of 2013. We also think that view is well within buy-side expectations.

From our conversations with suppliers, we know that there is a general fear of the high rates announced by Airbus and Boeing, let alone those being studied. We believe these concerns are natural, given the unprecedented volumes announced and under study. Concern is also driven by a fragile global economy.

86 Comments on “Key supplier says engine makers unsure of Boeing ramp up plans

  1. Well, with things like the mid-shaft problems of the GEnx, GE isn’t helping Boeing in their planned ramp up.

  2. Have the japanese partners expanded their capabilities yet?
    Their initial production infrastructure ( mainly outclaves ) was said to introduce hard limits on monthly production.

  3. I thought the Japanese were going to build more autoclaves to keep up with production.

      • from the 1st article: 1.5 times increase in capacity so probably only 10 sets or a bit less ( the best numbers I’ve seen previously were 6.5wingsets/m)

      • Does anyone know what the lead time is for the engine OEM’s. That is, how synchronized is their schedule with the production of the 787’s. With all the orders that will be filled in 2013 and after, it does not appear to be such a big risk to be a little ahead of production since they can always slow down to catch up.

        Or, is this report simply indicating that the engine OEM’s are doubtful that Boeing will reach it production rate of 10 planes/month and are keeping costs down by restraining their supply chain until they have better confirmations.

      • Engine OEM’s do not want to have large amount sunk in WIP, I can tell you that.

        It takes about a year from order of a forging billet or large casting to delivery of the engine (on that scale, it varies of course). Typically the larger the part the longer the lead time (this also varies of course) is a general rule (which is pretty much spot on for the first couple of engines in a new program. Little unsure about a ramp up, but lead times are long. But the OEMs do not want to be late with engines to the FAL, that is considered veeery bad. But is has happened.

  4. Engines don’t get installed until the end of final assembly so production of engines and the airframe parallel each other. Both are very complex build ups and probably have 1+years flow times depending on how you measure them. Both are also hard to change rate so they can’t adjust easily.

    I think your second paragraph is more to the point – if one gets their rate up and the other doesn’t then they will build lots of expensive inventory quickly. For instance if the engine makers had ramped up their production to the original 787 schedule they would have hundreds of engines sitting around today.

    • To add one more point – ATI supplies titanium to both the engine and airframes and this feeds into some of the longest lead time parts of either one, so they get pretty good visibility as to how the two are building up inventory which is an indicator of product rate increases. Wherever there is a production capacity constraint, inventory will build up behind it and in all the other parts that feed into the next level assembly. Sort of like a pig in a python.

  5. Should have read GT62’s comment before posting… sorry. Said all I said and much better too.

  6. I can understand the concerns of the engine OEM’s but with lead time for titanium, for example, they get pretty good visibility of the rate of product increases. Also, isn’t there communication between Boeing and the engine OEM.

    This is not trying to make the process simpler than it actually is, but both production lines are essentially running parallel with periodic announced changes. Once things start to run smoothly for the Boeing line, it should give confidence to the engine OEM’s.

    The problem seems to be for the next year or two when there are stull doubts about rampup speed but doesn’t this require engine production to keep up with and produce the announced number rate and more that is flowing through the line. This requires close coordination and supply chain coordination. Having extra forging billits or extra castings is almost protection for the future.

    Seems to me that this is a manageable control issue and fortunately there are several hundred planes in need of engines. This is a business issue that the engine OEM’s have familiarity with. Please amplify why there is more concern than usual during this transitional growth stage.

    • Also, aren’t there approximately 65 planes without engines completed but in need of rework that will be absorbed into the delivery flow this year that will absorb any excess inventory. That should serve as a buffer for the engine OEM’s.

      • Relative to the 65 ( less 4 test planes) or 61 planes in need of rework: Will there be the need to have each of these planes go through the Everett production line to accomplish this work or will it be done without interfering with the present flow of work.

        If it requires production line attention, does that interfere with the production rate or is simply incorporated into and influences the rate change. Most of this work will take far less than the normal production period but I am wondering if it will interfere with the flow of overall new production and thus interfere with rate change

      • Surely not all the 61 aircraft sitting on the tarmac in Everett are missing engines — or are they?

      • Late production numbers go first. none from 10 .. 22, very few from 23 .. 40, few from 50..62, then all towards 70 and another cluster just below 50.

  7. thysi :Surely not all the 61 aircraft sitting on the tarmac in Everett are missing engines — or are they?

    I believe one or two have been reworked, have engines and are being prepared for future delivery but the rest remain with concrete blocks hanging from their future engine location. The engines are installed at the last stage of preparation for testing and flight.

    Check out “All Things 787” for latest updates on preparation, rework and delivery schedules.

    • Correction: Uwe #16 is more accurate. A few have been delivered already but there are at least 50 of them sitting on the tarmac with no engines.

      A more careful study of the “All Things 787” will give the exact account of the status of all planes produced to date.

    • All right … if most of them are engineless, Boeing will need to be planning the completion of those ones well in advance, given the engine lead times.

      I do know “all things 787” but I find it to be a bit too much of a fanboi blog to read regularly.

      • thysi: Boeing anticipates the remaining 50+ tarmac planes to be reworked systematically and all delivered by mid 2014 (approximately 20 months ) That means they will absorb close to 50 engines alone just for these “reworks”. In addition the engine OEM’s will have to plan for providing enough plans for the production airframes and the anticipated production rampup. Therefore, if they are afraid of getting ahead of the production rate curve because Boeing does not meet its anticipated rate level, there are 50 planes to absorb any excess engines….that is close to a two plane increase per month. Certainly by mid 2014, production should be smoother and the engine OEM’s should be coordinated with less inventory risk.

  8. All things 787 seems pretty accurate:
    Ln 1-5 storage or written off
    Ln 6-22 5 delivered, 3 in rework active, 10 storage inactive
    Ln 23-66 21 delivered, 10 pre or flight testing, 10 in rework active, 5 storage inactive.

    So of the 66, 26 delivered, 10 near delivery, 10 active rework, 15 storage, 3 written off, 2?

    They are getting there…

    • Mike, Thank you for a more careful reading of the color coded All Things 787 production chart. I was careless and mistakenly based my comments on false information. This is one of the benefits of the Comments!

      Now the buffer from the reworked inventory is thinner than I suggested. With 26 delivered and 10 near delivery ( and engined), there are approximately 30 planes unengined; 15 of which are in storage and 2or 3 to be written off and 10 in active rework.

      So 25 airframes serve as the “buffer” discussed above with Boeing saying that all will be delivered by mid 2014..or the need for approximately one engine per month.

      This increases the margin of production risk for the engine OEM’s but still provides some absorbtion for any unsychronized rate increase.

    • They are getting there –but of the 17 early frames (which are the furthest out of spec and need the most rework), they have only delivered five. Those will be the biggest challenge.

  9. The engine designs are not yet stable.
    Ramp up of the GEnx is complicated by redesign resulting in new parts, some of them long-lead, for PIP1 and PIP2 product improvement packages. PIP2 is not yet introduced.
    Likewise ramp-up of the Trent 1000 is complicated by redesign resulting in new parts, some of them long-lead, for Package A, Package B and Package C improvements. Package C is timed to power the first flight of the 787-9 in Q3 2013. A Follow-on package called TEN is being defined.

    • Are you suggesting that the synchronized ramp up of both the airframes and the engines may be held up by the inability of the engine OEM’s to stabilize their designs and implement them rather than inventory control issues.

      Is it possible that engine issues will prevent Boeing from achieving its scheduled goals?

      Others on this post seem to feel that expectations are fueled by over optimistic expectations in general. You are being more specific.

  10. Based on statistics of the last 2 years, what would be a realistic forecast for the end of 2013.

    Me too is highly critical of the upbeat perceptions of analysts, research groups, banks and investors. After seeing their predictions hitting the wall dozens of times I can’t stop wondering what would be their best guesses if they had that (symbolic) gun against their head. I have the impression they are partly independent and the truth is just one of their drivers in predicting future milestones. They tend to say what important stakeholders want to hear too.

  11. Umm, not to be too nerdy but 25 planes x 2 engines is 50 divided by 25 months is… 2 engines per month. ;0)

    In any event I would guess that there is some surge capability. Since the 787 and 747-8 engines are of the same family perhaps some of the reluctance is based on the slowing of the 747 ramp up due to poor 8i sales and deferred 8f sales?

    • Mike, Thanks. You are right again. Boy, I am having trouble keeping this topic accurate!

      See Guru Josh #25 who suggests a very different point of view.

      • could be nigh impossible to match engine production in a just in time fashion under the constraints of various PIPs and fickle
        Boeing and/or customer ) delivery scheduling.

        Everybody wants the most efficient engine.
        Everybody wants his plane ASAP.
        Boeing has a mountain of change incorporation to coordinate and execute.
        Lastly the shareholder value needs to be pampered.

        Something got to give.

  12. The original plan was to produce 10 787s a month in 2010 and 14 or even 16 in 2011-2012. I guess GE planned to have delivered hundreds (500?) by now. Were the problems at the engine OEM’s as big Boeings?

    • GE and RR planned to deliver engines conforming to spec from day one 😉

      Actually the whole project was rife with “planning” and “promises”.

      Being unwilling/unable to back away from plans and promises aggravated the
      situation quite a bit imho.
      How much money and effort could have been spared from being more realistic,
      going for a larger more reasonable amount of time for corrections instead of buidling
      a wide range of intermediary products for 3 years?

      Would more / all customers have jumped ship under a more honest approach?

      • The original approach was quite realistic. The ramp up to 7/month within 5 years looked very much like the one proven with the 777.
        On the 787 sales got carried away with order prospects, expanding volume to 10/month. Then management failed to admit delays and compressed this expanded volume schedule from 5 to 3 years…
        There are quite a few rating the 787 business model a staggering success already today – they obtained Boeing stock at $30 (or options free) and sold at 100+ 😉

    • Re. 787 production rate of 14 to 16 frames per month: Boeing has never announced plans for 787 rates higher than 10/mo. They have studdied higher rates, but it was never a part of the “original plan”.

      Re. Airplanes without Engines: The engine manufacturers did not stop producing engines during the time the 50 or so airplanes awaiting rework were produced. The engines for these aircraft were manufactured, but Boeing deferred delivery because it made no sense to install an engine which would then require immediate pickling for long-term outdoor storage. The engines have been stored in indoor, climate controlled storage awaiting airframes which are closer to being ready for delivery. In the meanwhile, both engine manufacturers have developed PIPs and SBs, which are (to varying degrees) being incorporated on the engines before they are delivered to Boeing.

      • Are the PIPs retrofittable? Otherwise the engine OEMs may no want to produce too much inventory.
        If its not the engines holding up deliveries, then what is it?

  13. KDX125 :
    Are the PIPs retrofittable?

    All of the PIPs have multiple elements to them. Some elements are retrofittable, others are not. Regardless, the SBs certainly are retrofittable. RR has a critical SB on the gearbox and GE has a SB to inspect or replace the midshaft. Many operators are likely to demand these be incorporated before they will take delivery.

    KDX125 :
    If its not the engines holding up deliveries, then what is it?

    It was the midshaft which held up the Qatar delivery, as Big Al refused to take engines with the 90 day inspection requirement. As for other deliveries being “held up”, are you referring to the airplanes awaiting post-FAL mod, or some of the more recent line numbers which have not delvered yet?

    • There was some media activity over “outsourced customer familiarisation activity” at Boeing ?

      My guess is the current deliveries are a versioning and documentation nightmare.
      Rising regular “to spec” production should take away some pressure
      while mixing of -8″heavy” and -9″improved” parts should return some of that pressure.

      midshaft:
      This is fixed now by way of (back)changed coating processes?
      There was some talk around that the 748F engine failure was not the exact same
      as on the 787 ?

    • What held up deliveries of new-built aircraft that didn’t need to go through the EMC before the FMS issue? Why so many B and C test flights per aircraft?

  14. The 748 engine failure was not the shaft problem, it was deemed to be a wrongly inserted part. A huge sigh of relief for the freight operators? Anyway I think the hold up in delivery is lack of human resources after airframes are completed, 787 testpilots and mechanics and engineers. The EMC is a huge drain on people that should work on pre flight I guess and 787 pilots are a shortage, maybe they could offer some unemployed airline pilots some temporary work if the certify on the 787? Must be quite the number on both sides of the pond. But maybe being a testpilots is too much for some?

    • To CM #35: Do you know how many additional engines were produced beside the first 120+ that were/are stored for the reworked airframes.

      How did the engine OEM’s adjust to the delays. What happened to the rate of production and how much of an inventory is currently available? Are they producing at rate to match the current airframe schedule or less than that and using inventory to keep with delivery.

      How are they trying to keep tighter supply chain controls but stay prepared for increased rates of production?

      • I do not know how many engines were produced and are now in storage. There is no question, as it became clear the early frames would require rework and there would not be a massive wave of deliveries immediately following TC, the engine companies slowed production to better match the expected delivery stream.

        @ en590swe – the GEnx-1B and -2B both have the midshaft finish issue. The AD and inspection requirement applies to both the 787 and 748. However, you are correct, one of the 748 engine incidents was not related to the midshaft. It was a build issue.

      • Between Guru Josh #25 and CM #35.37 & 42 It is not clear how many engines, most or many of which will require PIP’s and SM’s , are currently in inventory. The engine OEM’s did not halt production on a dime so there must have been an accumulation of finished or unfinished engines.

        The issue on this post is whether the engine OEM’s are not confident in Boeings new production schedule are having production problems of their own. Additionally, is the question of how much of a buffer there is to allow synchronization with airframes to ramp smoothly while controling inventory inbalances

  15. At some point in 2007 or earlier the engine manufacturers must have pulled the breaks. They were closely involved so better informed then the market and weren’t dependent on official Boeing updates and Jon Ostrower.

    • Keesje,

      Things like engine delivery to Boeing are a contractually stipulated requirement. Engine OEM’s agree to have engines “on dock” based on a schedule which is triggered by when individual serial number aircraft reach a given point in the production system. Deviations from this contractual obligation are not made arbitrarily by an engine company based on their own internal assessment of when Boeing will complete or deliver a frame. Engine OEMs are a supplier to Boeing and deviations from their contractually obligated delivery requiremnts only happen following a negotiated restructuring of their delivery obligations. To behave otherwise would trigger huge penalties which are baked into every supplier’s contract.

      • That looks like you write only about one half the story.

        What kind of contract binding do we have for sourcing ( and paying) for these build to contract engines in a reasonable timeframe?

        If I design and build expensive bespoke equipment I am very carefull in setting up penalty enforced guarantees for getting
        paid even if the customers has a massive change of mind.

        • I’m not omitting part of the story. We weren’t talking about money, we’ve been talking about parts and airplanes. Clearly, when one party asks the other to revise the terms of an agreement, if there is a business consequence, the company affected will assert to be compensated for the change to the originally contracted terms. Boeing taking engine delivery by a different schedule than agreed to is no different than an engine supplier failing to meet contracted performance spec. These issues will all be asserted by each company against the other and in many cases each company will use their assertions to offset the other’s.

          • I don’t think engine manuf. producing rotating industrial ornaments to complement an artsy arrangement of lawndarts is a standalone topic.

            I would be quite surprised if for every produced 787 starting from initial rollout of LN1
            GE and RR silently complemented this with their own stash of complete engines waiting, waiting, waiting to be hanged. ( If they had done that it would be management waiting to be hanged 😉

            So my guess is that a reasonably small number of engines were completed in a leasurely way. Complemented by further testing, design and later incorporation of PIPs.

      • Concomitantly, Boeing must be contractually obliged to inform the engine OEM’s of what point an individual aircraft is in the production system. This certainly gives the OEM’s a clear picture of the pace and rate of production and it can gauge its inventory and production schedule.

        This must create a reasonably synchronized method but the variations must have created some stress for the supply chain. Nontheless, it is clear that there are obligated delivery requirements so the problem rests with the engine OEM’s or they face heavy penalties. It may be cheaper to carry inventory than to be behind delivery requirements

        • Becoming the tentpole on an airplane delivery triggers huge financial penalties for a supplier and (depending on the circumstances) can impact Boeing’s willingness to place future business with a supplier.

          Overall, the kinds of suggestions we’re seeing in this thread are quite laughable:

          ->That suppliers deliver parts to Boeing based on their own internal assessment of when Boeing will need the parts.

          ->That Boeing is completing airplanes without informing suppliers of their plans.

          ->That Boeing has no idea or control of when parts arrive.

          ->That penalties for failing to meet contractual obligations on the part of Boeing or a supplier trigger chaos and uncertainty with no defined process for handling such a circumstance.

          • Nearly overlooked your little gem of misrepresentation.
            Oh, well it the season, right?
            Everything will be well after November 😉

      • CM brings a clearer picture of the process. All these contingencies are part of the contracted provisions and provide for remedies and compensation in the event that one party or another fails to meet its obligations. It is the compensated penalties that pay for the dislocation of inventory and supply side inconvenience. There remains a coordinated schedule of preparedness with monies available to make up for and provide for the needs to keep this coordination as defined as possible.

        • The unexpected ornamental phase after leaving FAL must have wrought havoc on planning and contractual contingency. Other suppliers certainly did not saveguard enough to not run into problems ( see Airbus having to bail some tier 2 suppliers involved in Dreamliner production ).

  16. Uwe :The unexpected ornamental phase after leaving FAL must have wrought havoc on planning and contractual contingency. Other suppliers certainly did not saveguard enough to not run into problems ( see Airbus having to bail some tier 2 suppliers involved in Dreamliner production ).

    There is no question that some 2nd and 3rd tier suppliers were probably hurt and in some cases had to be bailed out. The supply chain has a dicipline to it and I suppose depending on importance and relationship. financial arrangements may be employed to keep the upward flow from from creating delays.

  17. I just want to enter a concept (Pardon my poor English )
    But Engine OEM were squeezed between huge penalties due to very poor perf’s at the beginning, we have to wait for the GEnx PIP2 to get somewhat in spec’s some 4-5 years behind schedule (And not much better for the Trent 1000) !
    Just to add that the engines have been peppered with various faults and huge basic modifications in the case of the Trent following the Derby and Qantas Show !
    So, I’m sure arrangements and compensations have to be performed both way !
    Boeing through their delays, (Not going to pay (or allow customers to pay) for 4-500 off spec’s engines in stock and docked at Seattle) !
    And motorist, very happy to win time to improve their engines perfs and liability !

    So all is not in the contracts, it has to be worked out and negotiated both way, alike with all the main suppliers (The CFRP parts in particular)

    • Rensim, Good point. Having legal training makes me emphasize the role of contracts, etc., but, of course, not all is covered and there will be lots of room for negotiation. The issues run through the entire supply chain as well as Boeing.

      You did write that there were “4-500 off spec engines in stock and docked at Seattle”. Is this information accurate or just an estimate.

      • It would be foolish to produce 1000 expensive engines, without maturation, knowing they will not be needed for yrs. Irresponsible capital blockage. In nobody’s interest. No doubt Boeing/ GE/ RR did the reasonable thing & slowed down production yrs ago.

  18. BA Investor :
    Rensim, Good point. Having legal training makes me emphasize the role of contracts, etc., but, of course, not all is covered and there will be lots of room for negotiation. The issues run through the entire supply chain as well as Boeing.
    You did write that there were “4-500 off spec engines in stock and docked at Seattle”. Is this information accurate or just an estimate.

    Just a possibility and may be more heavy numbers, 300 B787, have been lost in production, at least … Just think at the pyramid of engines received, if the contract had been respected, regarding to the scheduled deliveries !
    Obviously This has not happened, Motorist have been negotiating behind the screen, with Boeing !

  19. My worry today, is to see the first TXWB from RR certificated and in Toulouse …
    It seems RR take his time, to arrange some compressor seals “Details” with the help of the A350 delays … hum !

    • It would be foolish and in nobody’s interest if subcontractors weren’t using ” free” time created by integrator delays to enhance their products. If it doesn’t create new schedule risks.

      Part of the conflict Boeing has/had with Alenia. Boeing outsourced lots of responsibility for delays to Alenia, well, more exactly, they didn’t deny conclusion in the media, which is the same for the bigger public. Alenia says Boeing sent them a continuous stream of significant changes, new insights during development and even after, creating chaos. But Alenia can’t publicly burn down a major customer like Boeing. And thats how we arrived at the current public perception, blaming Alenia for more then is fair. And Boeing isn’t protesting it..

      • I’ve had a customer trying to do that to me once.
        Contract work for a time critical project that would only fit in the timeline when staying with the initial solution decissions and then spraying me with changes and alternates.
        In parallel they tried to introduce high contractual penalties for delays. ( contract was never signed )
        Synopsis: the strategy was to bind me to the contract and then force me into penalised delays to keep them financially afloat. ( a background they had carefully obscured ) . a*holes.

      • There must be whole division in each of the major suppliers as well as at Boeing to keep track of issues as they were incurred and to follow the contradictory claims. As the delays became more clear there had to follow discussion, revisions, contract formulations and mediation/arbitration or just plain brass knuckle negotiations. Also, keeping track of what compensation was due to who as the delays increased and penalties were incurred by Boeing from the Carriers who had scheduled deliveries. The amount of monies must have run into the Billions.

        To my mind, there had to be a shared regime of allocating these enormous losses. The beneficiaries of this product ( engined airplane) had to also be the risk takers. It sounds like all were complicit in one way or another in contributing to these delays and mismanagement. Ultimately, however, when all these problems are overcome, they will make substantial profits and maybe learn something from their mistakes. So, the losses have to be allocated in some reasonable way. From Mitsubishi, to Alena, General Electric and other suppliers who contributed to the delay. In other words, “contributory negligence” has to be inserted into the formulation for penalties and compensation. This is no easy task but it can be worked through with difficulty and hopefully there will be a steady stream of work and profits to provide the income to pay these “fines”. Just imagine if the plane did not sell and there was no stream of profit.

        So there is a regime of shared risk taking…each picking up the initial losses in some way or another. Boeing will have to pay its share. Who contributes to the compensation to the Carriers becomes part of the overall “pot” that will have to be allocated and shared .

        These large multinational Companies are able to deal with these issues and are financialy strong enough to carry the burden. In essence, they all became investors in this venture because the promise of long term gains were promising enough.

    • This information,if accurate and provided earlier in this posting, would have saved alot of speculation and concerns. Mr. Harshman of ATI must have other sources that informed him of a different perspective.

      At least the circuitous responses led us down some interesting paths which touched on different topics relative to Boeing and its ramp up of the 787 and 747

      • That’s a total of ~400 engines until the end of 2012. Let’s assume about 35 747-8 and 20 GEnx-powered 787 delivered until then. This would leave an inventory of 220. Would GE be willing to stockpile as many or would they rather turn down the volume in production a little?

        And what about Rolls?

  20. KDX125 :That’s a total of ~400 engines until the end of 2012. Let’s assume about 35 747-8 and 20 GEnx-powered 787 delivered until then. This would leave an inventory of 220. Would GE be willing to stockpile as many or would they rather turn down the volume in production a little?
    And what about Rolls?

    Is it possible that the numbers in the referenced article is talking about the ACCUMULATED deliveries rather than the INCREMENTAL ones. In that case there would be a total of approximately 200 engines which would make sense

  21. Just to think about this !

    A priori Boeing dont pay for the engines … the large majority is ordered separately by the final customer !
    But Boeing have some responsibility over the global perfs …
    So the inventory, is not so important for Boeing themselves !
    But the final perf’s have to be monitored very closely by Boeing, and their customers !
    Interest conflict at every corner !
    An a good task for lawyers and marketing, either board negotiating … $$$$ !

    • Rensim You enjoy creating hypotheticals…examples that may not be true but serve as a way of understanding a situation.

      I am not sure who or how the engine is ordered or paid for. I always assumed that the Carrier was given a choice and ordered the airframe AND engine from Boeing. The engine OEM’s are suppliers and provide inventory for Boeing to sell.

      The situation you describe would certainly be fraught with complexities and conflicts.

      Maybe there are twists in this process that many of us do not understand.

  22. I think Boeing planned to deliver about 100 787 until 2010 and (at least) 10 a month in 2010, 2011 and 2012. About 460 aircraft / 920 engines by the end of 2012. Lets assume half GENX, + 200 (?) for the 747-8 = about 600-700 Genx engines by the end of this year, under the original contract. I guess that didn’t happen.

    • keesje Read CM’s post #45 & 47 and you will understand why this did not happen. There is tighter coordination/synchronization than suggested by the comments made at the Allegheny Investors Conference. It certainly makes sense unless CM’s understanding is incorrect and the process took on some divergences because of miscommunications or false information…both hard to understand how that would happen.

      • In fact, engine OEMs make their own forcast on engine production levels based on, but not limited to the airframe OEMs’ production guidance they get. Engine OEMs may downscale their production outlook *below* an airframer’s guidance in case they lack of confidence in this guidance.
        This is true for any supplier. Spirit is known to have unilaterally stopped fuselage production when they saw that assembly of initial 787 airframes fell significantly behind schedule on Boeing’s side.

      • Guru Josh Are you responding to CM,s post 45 & 47 which defines contractual relationship and obligations between Boeing and the engine OEM’s.

        We are getting contradictory responses about engine OEM’s production rates…from large overproduction to below” production because of lack of confidence in guidance. Several contibutors indicate visability and production information that ties the relationship to actual airframe production and CM’s posts indicate these are contractually bound with penalties for failure.I imagine there was some confusion several years ago when the delays first started occurring but would guess that those issues have been negotiated and worked through.

        The question is what is happening now and in the future. How many engines are in inventory and how coordinated is the engine production and coordination with its supply chain

  23. BA Investor :
    Guru Josh Are you responding to CM,s post 45 & 47 which defines contractual relationship and obligations between Boeing and the engine OEM’s.

    I am just providing some insight. Near term engine deiveries are synchronized JIT between airframe and engine OEMs. In the case of development programs or significant fluctuation in production numbers (initial ramp-up, ramp-down due to external effects etc.) the engine OEM will make his own judgement and not believe blindly in airframers’ rosy projections – in order to avoid huge inventory at the engine OEMs expense.

    So it is conceivable that Boeing progress with 787 production outpaces engine production because a) it has been scaled back from Boeings predictions in anticipation of less than 10/month until end of 2013 and b) is suffering from the impact of redesign.

    It is also conceivable that the decidedly pedestrian 787 delivery ramp-up has nothing to do with engines at all.

    I do not positively know.

    • Guru Josh, Your points are well taken. If there is an earlier inventory of engines, it would serve as a buffer and avoid any non delivery penalties.

      That number has not been verified but the article referred to in post #63 indicates ( confusingly to my read) a substantial number of engines are in production contrary to the ATI Chairman’s statement.

      • The projection of new 200 engines to be produced in 2012 is dated December 2011. Might have changed.

      • Last comment on this series. I can see where we will not have definitive information on 787 engine inventory but have learned or at least provoked alot of thought about the ramp up process.

        Overall, I focused on the 787 rampup, but maybe the doubt expressed about ramp up schedule was aimed at the broader ramp UPS (plural)…that is the combination of the 787-8, 787-9, 787-10 as well as the 737 Max and the future 777. The skepticism expressed was for the overall future production increases for the Company and not exclusively for the present 787-8 ramp up

  24. ( see Airbus having to bail some tier 2 suppliers involved in Dreamliner production ).
    Uwe I would be interested in reading this. I Googled it but found nothing. Could you please reference the article location.

      • BA Investor :
        I am not sure who or how the engine is ordered or paid for. I always assumed that the Carrier was given a choice and ordered the airframe AND engine from Boeing. The engine OEM’s are suppliers and provide inventory for Boeing to sell.

        It can happen both ways, but typically the engine deal is separate from the airframe. One noteworthy exception to this is the 737NG, which having only one engine offering, always includes the engine as a part of the airplane. Perhaps the A350 will be similar? I am aware of at least one A350 deal where the engines were included in the Airbus offered price. It may be this is how all A350 deals have been structured.

        Guru Josh :
        In fact, engine OEMs make their own forcast on engine production levels based on, but not limited to the airframe OEMs’ production guidance they get. Engine OEMs may downscale their production outlook *below* an airframer’s guidance in case they lack of confidence in this guidance.
        This is true for any supplier. Spirit is known to have unilaterally stopped fuselage production when they saw that assembly of initial 787 airframes fell significantly behind schedule on Boeing’s side.

        Absolutely true, GJ, and I did not mean to imply otherwise. What is important to understand and was not being addressed in the many comments above is these decisions are never taken in a vacuum. Suppliers and OEM’s communicate on a continual basis about production needs and delivery schedules for components. At times a supplier will make the call to schedule production different than what the OEM has requested, based on their own analysis, but they do so knowing their contractual obligations remain in place and the penalties for failure to deliver in a manner which supports airplane production will carry penalties.

        Uwe :
        The most media visible case that I know about is imho PFW Aerospace ( hyd. piping ).

        Can you point out in this article where it says the Airbus acquisition of PFW was related in some way to the 787 delays? I missed it, bit admit I was not using my imagination.

        Uwe :
        Most cases will probably be kept under wraps.

        C’mon, Uwe! This really is all you can offer Jim to support your argument? @@

        • CM, as I don’t have access to insider information I can’t model my replies by omissions 😉

          You’ll find a smattering of articles in the german press.
          Still having Boeing as (another) major customer none of these entities will be vocal about
          their missgivings. ( Same as MHI, Alenia, ..)
          PFW showcases another “US sourced” problem. Their former majority owners were a bunch of “takers and looters” popularly tagged as “Heuschrecken”.

      • CM Your above response about engine acquisition is intriguing. Are the engine OEM’s free to negotiate different prices for different users? Is there any advantage for a Carrier to purchase them through Boeing? What about the installation arrangements..is that a joint undertaking and contractually defined as to who does what and how paid for.

        If there are subsequent engine problems are the engine OEM’s totally responsible for repairs and even compensation?

        Would it be fair to look at this as ( in simple terms) two separate systems that interact yet have separate responsibilities and obligations i.e. Boeing would not be responsible for aspects of the engine operation or the engine OEM warrants the product so long as it is operated in a “normal” (?) way.

        I assume that the engine OEM pays for the upgrades and those arrangements are made directly with the Carrier.

      • CM Also questions about maintenance of the engines. Is this analagous to a maintaining an automobile? If I have a problem with my car, General Motors takes care of it but I have to change the fluids, etc.

        I see in the press that there are some issues over Carriers maintaining the planes and specialized private contracted maintenance centers.( Perhaps there are authorized dealers!)

        Can the Carriers purchase extended warranties. Seems like the servicing of engines is both a profit center for the engine OEM’s as well as a source of price negotiation.

      • Uwe in reading your references I don’t see how you come to the conclusion that Boeing delays caused PFW’s problems. I saw in the Aspire article your assertion but there is nothing supporting your opinion. The second article actually talks about Airbus’ problems with their tier 2 suppliers across the three programs they outsourced large subcontract packages. In looking into the PFW equipment line card, it shows that they were supplying Airbus far more than they were to Boeing. So there is also the possibility that Airbus, with their design/production disruptions, was the cause. Also considering the problems of tight money supply in the EU or just plain bad management, I don’t see your assertion/opinion to be valid. There are way too many other variables that are possible/probable causes. I am not trying to be snarky here.

  25. BA Investor,

    Answering your questions roughly in order…

    Yes, engine OEM’s negotiate a unique deal for each customer. It is not unusual for the engine acquisition cost to be very low if the airline is signing up for support services at the same time.

    Engines come with their own guarantees. The airframer has no contractual/legal responsibility for managing in-service problems with the engine, although they are always very actively involved when there is an issue.

    Boeing does not “endorse” or otherwise provide some kind of “authorization” credential to any 3rd party service providers. Maintenance providers are either legally qualified to maintain a Boeing aircraft or they are not. Boeing (and Airbus) do, however, offer “total care” service offerings for their aircraft, which are exclusively offered through a pre-contracted network of OEM’s and service providers.

    I don’t know about Airbus, but Boeing aircraft are offered with consistent warranties to each customer. Sometimes, customer-unique guarantees are offered to address a specific concern related to maintenance, reliability, etc, but this is more exception than rule. Boeing does not offer any kind of optional extended warranty.

    Price is something you get when you are ready to buy an airplane 😉

    • CM Thank you very much for your informative responses.

      It sounds like both engine and airframe OEM’s work closely together and it serves both of their interests to have their production and deliveries coordinated as well as the ramp up to go smoothly without interfering with the other.

      You have brought alot of clarity to the overall topic.

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