787 to cost Boeing $6bn in cash-UBS; more on lithium-ion batteries

Update, 7:30am PST: Headline: DJ Boeing 787 Probe Results ‘Probably Weeks Away’ -NTSB Chief

We’re trying to track this down, which we received in an email. (We don’t get Dow Jones.) This seems to us like good news–“weeks” instead of “months”–but we caution about reading too much into this until we get the context.

Update, 7:50am PST: AP has this brief report. “Weeks” instead of “months” does seem encouraging but this sounds like a statement of facts rather than any hint at a breakthrough.

NTSB will have a press conference tomorrow at 11am Eastern.

Reuters has this story.

Here is a story from the Christian Science Monitor yesterday on the batteries.

Original Post:

787 to cost $6bn in cash: So forecasts UBS Securities in a research note today, and this doesn’t really consider the Boeing 787 grounding yet. Writes UBS:

  • See 787 as $6B cash drag in 2013: Even assuming a relatively quick solution to battery issue, we still see 787 as a worse cash drag in 2013. We estimate 787 is a ~$6B cash drag in 2013 with ~$7B inventory build more than offsetting ~$1B advance draw assuming Boeing learns like it did on 777. Our forecast is worse compared to Boeing’s outlook for a similar 787 inventory build in 2013 as in 2012 ($5.7B) while extended 787 grounding would result in an even bigger cash burn.
  • Cash drag could be worse if battery issue lingers: As long as 787 remains grounded, Boeing is faced with the choice of either slowing production or building physical inventory. It will build inventory for now and we see risk to its $4B+ FCF [free cash flow] guidance on this. Boeing plans to deliver 60+ 787s this year, while we estimate every missed delivery adds $100-120M to our baseline forecast for a $6B 787 cash burn.

Retrospective: Here is the press release from 2005 announcing the selection of lithium-ion batteries for the 787.

Boeing presentation about lithium-ion batteries: In November 2012, a Boeing official made this presentation about these batteries in the context of transporting them in cargo holds.

Among the information on the slides:

Energetic failures (fire and/or explosion) of lithium type cells can occur for a number of reasons including:

  • Poor cell design (electrochemical or mechanical)
  • Cell manufacturing flaws
  • External abuse of cells (thermal, mechanical, or electrical)
  • Poor battery pack design or application
  • Poor protection electronics design or manufacture
  • Poor charger/system design or manufacture resulting in Overcharging of battery

Independent Study: We’ve now linked Airbus and Boeing presentations about lithium-ion batteries. Here is an independent study–all 126 pages of it–about the topic. This is not about aircraft batteries but the principals are the same.

33 comments on “787 to cost Boeing $6bn in cash-UBS; more on lithium-ion batteries

  1. Thanks for a good collection of links and info. Interesting that selection of GS Yuasa for the Li-ion batteries substantially pre-dates FAA approval of the Special Condition.

    Another link to add to this collection is a 6-14-08 article by Jon Ostrower, in which Boeing is contemplating changes to deal with concerns about low service life. See: http://www.flightglobal.com/news/articles/boeing-looks-to-boost-787-lithium-ion-battery-service-life-224663/

    Just a thought: it seems to me, if not for the power of the internet, enabling concerned individuals to research and share these documents, this problem would have been swept under the rug weeks ago. And, if not for the bold transparency by NTSB in releasing photos, most likely the 787 grounding would never have happened. In that case, resolution of this real safety problem would have been delayed until AFTER the fatalities happened. So, kudos to NTSB…

    • Thas was in 2008. long before first flight.

      What I did not get out of Jon’s article or elsewhere was information about the if, when and how of this. I am unsure if I can interprete the published high battery change rates as indication for “6 month service life” or if this was/is an independent problem from the one Jon Ostrower wrote about at the time. ( probably the latter )

      Do you have more information?

      • Uwe: I have not found other info, yet and am depending primarily on other content posted by LeehamN&C, et al.

        My key takeaway from the 6-14-08 Ostrower article was that even five years ago, Boeing was already concerned about the high rate of Li-ion battery replacement, so much so that they were considering how to fix that problem (which conceivably meant, abandon Li-ion for a different/better technology), and bits of info were getting out to the press.

        Beyond the initial battery problems, this story has really morphed into more of an analysis of how excessively secretive FAA/industry are about aviation safety details. We have seen, even in just the past month, revelations that NTSB is coming around weeks later to details that were somehow overlooked when things got serious and the first discussions were held (e.g., the hundred+ battery swaps).

        In the big picture, it seems quite one-sided; FAA/industry does everything they can to entice us into deciding to buy airline tickets, but they deny us the full information we should each have, to make informed decisions. In this age, with the internet, it is absurd that FAA and Boeing are failing to be fully transparent. Their aversion to transparency is far more damaging to public confidence in aviation, than is any photo of a burning battery. …at least that is my opinion…

      • 6-14-08 is long before Boeing could have had in service information from customers. ( FF in 2009Q4 EIS 2011Q4 )
        So, the initial concept and tests already indicated marginal performance. ( from iron bird or similar or from computation/simulation ?)
        Further Boeing entered certification with this information available inhouse and to certificators.
        Thus this is not an “unknown” or a “unknown unknown” ( some shoot Rumsfeld for that one ) but a well known from early on issue and imho a willfull missuse of certification authority.

  2. They never switched to manganese. It is still cobalt.
    http://www.americanmanganeseinc.com/boeing-787-dreamliner-lithium-ion-batteries-based-on-cobalt-not-manganese/
    http://www.flightglobal.com/news/articles/analysis-lithium-ion-chemistry-becomes-focus-as-787-grounding-continues-381457/
    http://en.wikipedia.org/wiki/Lithium-ion_battery

    They noted in Jon’s article that it was not a safety issue but other sources seem to indicate that manganese is more stable.

    If true, that is quite puzzling.

    • 6 month expectable service life from a product that is advertised as long life and high cylces is an issue. As I wrote repeatedly significant underperformance indicates abuse.
      You are hugging the parametric envelope closely. Step that little bit further and the thing goes “poof”.

        • a380, to answer one of your posts in a previous thread, Air India has been granted authorization by the Indian government to bring back two 787 from New Delhi to their home base in Bombay, on ferry flights.

  3. Jeff Lewis :
    In this age, with the internet, it is absurd that FAA and Boeing are failing to be fully transparent.

    When they appeared together on the stage with their New Clothes they were more “transparent” than they had bargained for. Despite the masquerade we could all see the naked truth.

  4. On the doubtful premise that the only bad question is the one not asked, I wonder (as an admitted amateur) if the 787 battery issue is not a combination of several parameters; the sensitivity of the Li -cobalt battery to temperature fluctuations in charge/discharge cycles, the very dense packaging and the venting provisions of the battery containment, in an environment that involves large changes in ambient pressure.
    Could the normal cabin pressure cycle plus battery heat within the container vent the container to cabin pressure at altitude, but the venting does not allow the container to return to ambient pressure as the aircraft descends?
    That would mean the internal battery pressure altitude would become much lower than ambient as the aircraft descended and put a substantial load on the container walls.
    The NTSB photos seem to show the battery boxes rather consistently with concave surfaces, as though a force had caused the box to partially collapse.
    I recognize there may well be severe distortion to the containers in the photos due to high temperature/fire, but if a pressure cycle partially collapses the container onto the battery it may eliminate whatever margins there were to prevent contact between battery elements.

    • The battery box is rather flimsy. 1.5..2mm Alu ?.
      They have been “blown up” like a balloon ( mostly the lid )
      The cells probably are designed to burst at ~3..3.5 MPa / 650psi.

      After thermal runaway the cell then should be under high pressure
      and the electrolyte saturated with released oxygen and other gases.

      After a cell burst I would expect all this to escape as a very hot foaming mess
      ready to burn with a bit of ignition energy ( small sparks, hot wire … )
      spraying from the ruptured burst plate holes ( small sides of prismatic cells, think soda can and “energetic” polyurethane foam ).
      I would expect that after filling the box cavity and expanding the lid stuff will escape still under considerable pressure through all available openings and slits into the environment.
      First it will spray out after pressure relief via outgasing the remainder will bubble out and run down the sides. ( Boston fire dep. reported flame spurts of 1..2 feet length )

      The electrolyte is lithium salts solved in volatile organic liquids. The liquids will partly evaporate leaving the solids (salts ) behind together with coked parts of the organic liquid.
      A perfect mess ;-)

    • Do you have a reference link were the lid or box appears collapsed ?
      ( only seen the flat surfaces undamaged ones and the blown out victims.)
      I don’t think the enclosure is rated higher than IP 41 / IP 42.

      pressure cycles are a concern for the individual prismatic cells. the sidewalls
      “breath” moving / exerting forces on the cell internals wound as three foil bales
      or whatever the proper english tag is.
      cylindrical cells are significantly less susceptible ( see why airliner fuselages are round )

  5. Uwe: “… a well known from early on issue and imho a willful misuse of certification authority….”

    I came to the same conclusion. So, maybe this reveals that Boeing was willing to go forward anyway, and sell this package to FAA for the needed Special Condition.

    And the next layer is, evidently, when FAA was positioned to apply full diligence to investigate and ‘guide’ Boeing, they were apparently on a donut break: zero diligence. Which, to me, is pretty solid evidence of a long-standing concern about FAA. I.e., here we have a huge Federal agency created to regulate an industry and insure safety, but the history instead reveals it functioning effectively as an aid to industry stakeholders, providing cover and protection for practices that drift ever further from the goal of safety. This is the same FAA that a couple years ago was under attack for the ‘Customer Service Initiative’ application, that led to FAA managers enabling Southwest to lapse well beyond AD deadlines for mandatory 737 fuselage skin repairs. And the response to that pressure? ‘Customer Service Initiative’ from 2003 soon became ‘Consistency and Standards Initiative’ in 2009. The same semantic splitting we see now, as to whether that really was a fire or a thermal runaway or a whathaveyou….; well, hell, to the airline passenger, the only thing uglier than that burnt battery is the fried reality of those in charge of safety.

    • If I have understood the certification setup there was no need to sell anything to the FAA.
      Bluntly put Boeing wrote their own certification framework, selected personel and decided on methods while the FAA got nice site tours out of it and a batch of certification documents for stamping.

      The process is the same we saw in the “softening” of financial supervision leading to the GFC. ( actually a two pronged approach: existing investigative institutions were submerged in wild terrorist hunts “everybody is a little Bin Laden so no time to see after big fraud ” and bigwigs from finance were inserted into advisory government positions writing their own rules.

      All under the auspice of compensating for lack of internal growth and diminished international competitiveness. ( In the realworld (TM) the only effect was to move public wealth into private coffers on the most direct way. Even “trickle down” is a mirage.

  6. Uwe :
    Boeing entered certification with this information available inhouse and to certificators.

    Don’y say this too loudly because Congress could hear you. ;)

    What’s important is not so much what the FAA knew, but what they didn’t know. They probably ignored what was really going on because they had essentially given a free hand to Boeing. That is where the scandal is in my opinion.

    • As I wrote before, the FAA sits in that nice and sunny martime place between Scylla and Charybdis. FAA are loosers, nobody loves them. Demise of the FAA was political willed, the neocons wildest dream “small government”. only it is a nightmare.
      For the same only more obvious look at FEMA in the Bush43 era.

      • I am as guilty as any of us for this, but we are drifting further from the battery. Nonetheless, I will throw a couple comments back on the assessment of ‘FAA’.

        I share many of those concerns about how similarly FAA and financial regulators were ‘softened’, creating an opportunity for insiders (economic terrorists?) to clean up while many others lose. This is an example of fully-matured, regulatory capture.

        The two points I will challenge, though, are the idea that nobody loves the FAA, and the implication that neocons want to see the demise of FAA.

        I can assure you that, in early 1996 up to and for a month or so after ValuJet crashed into the Everglades killing 110, there were many who loved FAA. Why? Because FAA was a very effective tool for targeting jobs, creating small zones of growth, and otherwise helping grease the political machine. To the Pres, the VP, the Cabinet, and to most Congressmen, FAA is a key ally for incumbency. That point still exists; just look at the FAA expenditures on NextGen, and AIP grants to airports (kinda like paying others to be your friend).

        As for the second point, regarding neocons… tougher subject, but my sense is there is not a lot of passionate call from either major U.S. political party, to scale down FAA. Neocons have made it clear they want smaller government, and there is plenty of room for cuts, but their targets seem to be focused more on social service gristle and less on corporate or industrial sirloin.

  7. From WSJ excerpt

    The company is looking at increasing the separation between cells in the lithium-ion batteries to reduce the potential hazards from heat or fire spreading within the batteries and adding enhanced heat-sensors, these officials said. Boeing also is considering ways to keep cells more rigid, preventing them from shifting under certain conditions and interfering with electronics.

    Well DUH !!
    The erudite term for that is

    Heat transfer ( eldon musk style )

    And Vibration and Shock load testing

    And perhaps – even as stringent as ” NASA man rated ” Li-ion batteries also used/developed by Boeing and Same battery maker

    Hmmmm how to make a Man rated battery but decide not needed for 200 plus passenger rated ??

    Must have dropped that slide in the Power Point presentation

  8. RE the Boeing NASA battery – an earlier search found this- but I’m sure there is more with more digging

    http://www.mcclatchydc.com/2013/01/17/180268/nasa-boeing-planning-to-use-lithium.html

    NASA, Boeing planning to use lithium batteries in space station
    Stay Connected

    By Curtis Tate | McClatchy Newspapers
    WASHINGTON — NASA is planning to install batteries in the International Space Station that are similar to the ones that grounded Boeing’s Dreamliner fleet this week and which are also made by the same company.

    Boeing is the prime contractor to NASA for the space station and is responsible for the integration of new hardware and software from a range of suppliers. ****In November, GS Yuasa Lithium Power of Japan won a contract to provide lithium ion batteries that eventually will help power the space station. *****

    Boeing referred questions about the space station to NASA. Josh Byerly, a NASA spokesman at the Johnson Space Center in Houston, said the batteries for the space station are the same technology but “radically different.”

    Byerly said the battery would not be installed for several years and would undergo rigorous testing beforehand.

    Read more here: http://www.mcclatchydc.com/2013/01/17/180268/nasa-boeing-planning-to-use-lithium.html#storylink=cpy

  9. Av Week article

    http://www.aviationweek.com/Article.aspx?id=/article-xml/AW_02_04_2013_p24-542578.xml

    Reliability ‘Key’ To Space-Qualified Li-Ion Batteries
    By Frank Morring, Jr.
    Source: Aviation Week & Space Technology

    February 04, 2013
    Boeing’s ISS lithium-ion replacement batteries include storage space for the worn-out nickel-hydrogen units.NASA/JSC

    Frank Morring, Jr. Washington

    Space station crews are set to replace aging nickel-hydrogen battery packs with new lithium-ion units in 2017. They are not particularly worried about the fire hazard from the technology that has grounded the Boeing 787.

    NASA plans to use lithium-ion battery cells manufactured by the same company that built the 787 cells. But the agency has subjected them and the computerized control units that keep the cells from overheating to the same design oversight it uses to human-rate other space hardware. Space quality standards appear to be working as the technology moves into expensive unmanned spacecraft as well. SpaceX founder Elon Musk, who uses lithium-ion batteries in his Tesla electric automobiles as well as the Dragon autonomous cargo carrier, has offered to help Boeing solve its 787 problem.

    “We have independent experts who review the whole design and implementation and hazard controls that we have on these,” says Caris “Skip” Hatfield, manager of NASA’s International Space Station (ISS) development projects office at Johnson Space Center (JSC). “Within the design itself, we’ve monitored the manufacturing process of the cells and have done audits of the cell manufacturing to make sure we’re satisfied that at the cell level there are no design [or] process issues.”

    Boeing, NASA’s ISS prime contractor, has a $208.8 million contract to deliver 27 of the batteries—24 for service on the station as orbital replacement units (ORUs), and three as ground spares. Weighing 425 lb. each, and measuring 39 X 39 X 18 in., the batteries include adaptor plates to store the worn-out nickel-hydrogen batteries they replace (see illustration). Batteries charge while the station’s solar array wings are in sunlight, and discharge to provide power in darkness. . .

    Goes on

  10. Uwe :
    Bluntly put Boeing wrote their own certification framework, selected personel and decided on methods while the FAA got nice site tours out of it and a batch of certification documents for stamping.

    Is this not what we call a “blank check”?

    • The price must be FOB japan. Purchaser must pay for cargo ship-sea shipping to meet current regulations for LI batteries up to 77 lbs limit by air :)

      And manufacture will not be responsible for improper installation or handling, such as rocket launch.

      But wait – maybe they can ship them overland thru siberia to russian launch site ??

      Or by open air barge to where-ever space launch facilities are ??

      • By “shipping” what I had in mind is more the journey towards the Space Station. At 425 lbs it must add substantially to the already impressive $8,000,000 price tag. But I appreciate the irony of the 77 lbs limit by air! :)

      • Does that limit apply only to “unaccompanied batteries” or also for integrated batteries? (Never looked into how complete integration is when forex a new ATV is shipped to Kourou )

    • blank check?

      debatable. A blank check is “stamped” as the first step while still blank ;-)
      In german we’d call it “durchwinken”

  11. Normand Hamel :
    By “shipping” what I had in mind is more the journey towards the Space Station. At 425 lbs it must add substantially to the already impressive $8,000,000 price tag. But I appreciate the irony of the 77 lbs limit by air!

    Well to meet regs- they can use 6 cargo flights to ISS by dividing the battery into 6 blocks, and reassemble them in space outside the station.

    That WOULD add to the price via outsourcing –

    it works for post it notes !!

    NUff – we are moving away from baselilne of thread ;-P

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