Boeing considers 40/mo for 737 rate; Airbus ups A320 to 40

Update, July 30: Airbus announced today it will increase the production rate on its A320 family to 40 per month.

Original Post:

Boeing is considering going to a production rate of 40 737s per month, with a decision to come in September.

Boeing Commercial Airplanes CEO Jim Albaugh gave us this number during our interview with him at the Farnborough Air Show.

The company is working with its supply chain to determine if and when this can be achieved.

Albaugh told us that there are two major suppliers, which he declined to name, that would have to expand their plants to accommodate an increase to 40/mo. We understand Spirit Aerosystems, where 737 fuselages are made, is one of the two.

Boeing previously announced rate increases from 31.5 a month to 34, and a month later, increased this to 35, effective next year.

Albaugh said that currently there is an 18 month lead time to increase the 737 rate but he wants Boeing and the suppliers to cut this rate because Airbus can increase rates on a shorter timeline–as little as six months.

Boeing believes the demand is there for the rate increase, but Albaugh also said at Farnborough during the press briefing that failure to do so will likely drive orders to Bombardier’s CSeries.

During the 2Q10 earnings call today, Jim McNerney, corporate CEO, said the “key questions is…[if] we have properly facilitized the suppliers…and we’re methodically working through…bottlenecks and challenges.”

Some suppliers new to expand, others need additional training and still others would need a new business deal, McNerney said.

28 Comments on “Boeing considers 40/mo for 737 rate; Airbus ups A320 to 40

  1. This would represent a substantial increase ( approx 15% 5/35) but does/would coincide with the opening of another production line.

    I wonder how you establish that the flexibility and expansiveness of your supply chain is up to the task. The recent issue with the seats from Japan shows what issues can arise. Is this accomplished by incremental steps as ramp up eventually to the desired number.

    This will certainly be an issue as Boeing starts to ramp up the 787 production line. Production will become the central issue once the 787 is certified. These are all 21st Century Production Challenges facing Boeing and its remarkable web of suppliers. There has been alot of focus on the suppliers…now the question is how they will respond when asked to accelerate

  2. If Boeing and their suppliers can get to 40 per month, wouldn’t that enable then to introduce the B-737NG replacement aircraft earlier? It would reduce the backlog of orders much faster, but can the customers take their aircraft deliveries earlier?

    I would guess Boeing could not get to the 40 per month rate before late 2012 or even 2013?

  3. IMHO- its strictly PR blather from Mr Post it, based on some neat looking curves on several power point presentations by the Chicago Power Point Rangers.

    The long term effects of adding facilities and manpower to both the 737 and 787 lines will invariably make the next cyclic downturn worse.

    Of course there may be some hidden tax advantages etc which could be driving the PR

    such as justifying a ‘ new’ production line in ??? for 737 that could later be used for the 737 ‘ replacement’

    The workforce is unlikely to respond well to the ‘ bigger whip ” – and despite all the blather- the higher the rate- the more serious the screw ups of anyl supplier become. Just think of what a major fire or earthquake could do to fastener manufacturers, seat suppliers, etc etc.

  4. Don,

    Why would this be any different if more of these tasks were done in house. Things like fasteners and seats have to be ordered from manufacturers in any event…Boeing does not produce every item that makes up the plane.

    I would imagine that part of assuring that the supply chain is functioning well is to assure some flexibility and alternative sources.

    An earthquake or fire could happen at the Boeing site too.

    Also, we are currently worried about the uptick in the economy not the next cyclical downturn…we have just had ours!

  5. exactly – even if ” more’ were done in house, the weakest link in the chain when “broken” for whatever reason has a much greater effect on production- deliveries at high rates.

    A few examples – after the last quake in Seattle ( 2002-3 ?) Boeing field ( King county airport ) was damaged re the runway. BA had many planes stacked up because they could not fly them into Boeig field for interior installation, etc.

    With a longer supply line extending around the world AND a high rate AND limited ‘ inventory”, the sensitivity to a glitch is magnified.

    At the same time doing certain things in house other than assembling parts is almost always more expensive due to higher overhead costs.

    Boeing has yet to figure out what/how to compensate for the combination.

    just in time works quite well when one is assembling a few hundred/thousand cars a day and all your major suppliers of LARGE parts are in the same geographic area ( think toyota ) – or GM or Ford.

    But airplanes are a bit more complex and have much larger parts and need more landscape just to ” park” or store them.

    And they are also a bit more complex than the B-17 – produced at about 1 per HOUR !

    Mr post it seems to think they can repeat those ‘ glory’ days by using a bigger whip.

  6. Don,

    That is an interesting response. In essense, though, you are saying that Airplanes are different than cars and the production issues are far more complex.

    Instead of selling a thousand cars, Boeing is selling a few hundred planes but at much greater pricing than a car…and far more sophisticated mechanically.

    The essential question is how to do this in the most efficient and cost effective way and Boeing has chosen production with a supply chain…with all of its issues.

    It seems effective to me if all goes well and there is no traveled work, etc. I thought this was the 21st Century Planned Production Method.

    What other less risky procedure outside of bringing more work in house…and now, a second productin center to spread the risk not only of labor issues but supply risks…

    You seem very criticlal of the entire approach…but please indicate the major flaws so they can be better understood….

    I know you think management is lacking engineering instincts, but please focus on production issues.

    Thank you. I think you have much to say but am not sure you are accepting of progressive production methods and therefore find fault when it is just change

  7. P.S. It is entirely possible that the production output has some structural limitation.

    That is, there is some limit to how many planes can be turned out in any one year. The decision not to go to excessive limits is very crucial in decision making. That is what Boeing has to be very sensitive to.

  8. P.P.S.

    Look how smoothed out the 737 production line is today…They are turning out close to a plane every day.

    Why can’t this same production efficiency be translated into each model? That is over time adjustments, motion studies, or whatever , enables higher productivity.

    I think here is where Union cooperation and input is crucial but that has not worked out satisfactorally.

    Is it possible that “Lego Like” production is really doable on the 787

  9. I’m NOT against improved and new production-supply methods, and agree that 2 facilities for final assembly generally have less risk IF properly arranged- developed.

    But after spending the better part of 30 years at BA as an mechanical engineer in operations ( manufacturing) and a large part of that working riviting and fastening and drilling issues, I am quite aware of continued reluctance to change in techniques and methods.

    As BA is about ready to find out- establishing a new production/assembly line in a non- aerospace area is more than a simple ” add 50 more hands’ to double the rate of widget asemblies.

    Standard learning curve- historical aerospace data indicates a 10 to 13 to one manhour ratio for the first 10 to 20 airframes/facilities/crew , and the curve doesn’t usually reach standard until around 100 airframes or so.

    Almost ditto for quality issues and supply chain kinks.

    And that’s with a relatively experienced ‘ worker bee ” population nearby.

    From friends still working in the area, my sense is that the Renton facility – assembly rate will be near or at max-optimum rate within about a year.

    “regardless of technique and workers assigned , it still takes 9 months to produce a baby.”

    BTW- many years ago, BA started to move-build tooling in Long beach to up the 737 rate, but dropped it in favor of major changes in renton assembly processes ( moving line ) After many teething issues, the result is what you see today.

    Given the employment issues now and in near future in Calif- Long Beach area ( and elsewhere ) and a reservoir of aerospace workers in the area, it MAY make sense to add a assembly line there – or in Moses lake (for a new facility ) – but taxes and other issues no doubt have closed out calif.

    All of which gets back to my initial post

    The power point rangers need to get out of the office and spend some time smelling the zinc chromate – instead of simply multiplying the production rate by a factor of employees/hour plus overtime to reach a new rate

  10. I believe we’re talking about the same Boeing that once built 16 B-17’s–a DAY.

  11. BA investor . . “Why can’t this same production efficiency be translated into each model? That is over time adjustments, motion studies, or whatever , enables higher productivity.”

    +++
    There are several good reasons

    1) Current tooling for most models has long since been amortized, and a significant change in assembly process would require newer- much different tooling along with scrapping existing tooling meanwhile maintaining production- deliveries AND training people to use new tooling and procedures.

    That it can be done is not the issue ( AKA 737 moving line ) – but at what cost and schedule compared to current- future sales and deliveries ?

    2) Not all vendors can ramp up or incorporate similar changes needed, such as more sub assembly .

    3) Then there is shipping issues, etc.

    4) Normally, starting with a ‘ green field ‘ factory and a all new production process is the best choice – ‘ from day one”

    5) Changing to all composite fuselage requires a much different production- sub assembly- final assembly process and tooling. usually big autoclaves are needed, and they have a limited thruput based on a function of time and temperature, and layup machines. adding mofre people doesn’t help much. Whereas a ‘panel ‘ assembly as is used on current aluminum airframes is more flexible- simply (??) add another sub or major assembly tool and another work crew.

    Then there is the IML vs OML tooling concepts ( IML means match/attach to Inner mold line surfaces, OML means match/assemble to Outer Mold line surfaces and dimensions.

    Most military – and especially stealth use OML concepts for extreme smoothness- while most commercial ( large aircraft ) use IML tooling/interface controls of dimensions. exterior matching is not quite as good- but in most cases it is a cheaper tooling and assembly process.

    Bottom line is that it is a very complex set of issues that must be carefully addressed before making a major change in process and assembly.

    The devil and the bucks ( + or – ) are in the details !

  12. Don,
    I am not equipt to answer your points about tooling and assembly process, but I do hope that Jim Albaugh and others understand what you are saying…and understand the concepts and options.

    I also thought that Charleston will be a “green field operation” and what is necessary can be incorporated successfully. It is hard to believe that they will not start training labor and bring in experienced people to make sure they get by a learning curve. Even I would understand that.

    The devil is always in the details and it seems like Boeing has experienced so many painful lessons in the last few years that it has gained some humility and insight. I see where there have created an “engineers” council or something like that to bring in the priority of engineering dicipline above marketing.

    Lastly, we are really speaking of the possibility of ramping up the 737 but definitely concerned about the production and slow rampup of the 787. That is the crucial model and they will have two production centers and the opportunity to build ione up from scatch.

    Do these factors leave you with any optimism as to the possibility of success?

    And lastly, if you had to give some advice to Jim Albaugh, what would it be?

  13. BA investor . . “The devil is always in the details and it seems like Boeing has experienced so many painful lessons in the last few years that it has gained some humility and insight. I see where there have created an “engineers” council or something like that to bring in the priority of engineering dicipline above marketing…”

    What they did was bring back some 10 to 20 year ago retirees/executives like Joe sutter to help with the mess they have made of things

    And they are building/implementing three production centers for 787

    a regular line at everett, a surge line at everett( in process now ) and a new line in S.C.

    even with experienced ‘ help “- the learning curve still applies, but might be steeper.

    as to albaugh – he has a better chance than most to eventually succeed- but at what cost ?

    Boeing schedule credibility is ZIP

    Not enough newbies in engineering coming in-

    Too many Boomers- experienced hands leaving in then next few years

    WAY to many power point rangers in charge

    Boeing WILL survive – but they STILL need to get candid input from the grunts – and I have not heard that really happening – just another ‘ new flavor of the month PR managemet technique ”

    Old example – in the 80’s- Boeing had W Deming come in to explain about quality, production, etc.’

    Big PR campaign followed

    about a year or two later, Invited him back to show how well they had done. great presentations,charts, etc. deming responded ( paraphrased ) you havent heard a word I said –

    Boeing never invited him back.

    Then they got Juran – everyone went to class – mandatory , – – – by a year or so later, most all of the ‘ changes’ had fallen aside

    Then came the 5S campaign in the mid 90’s

    Six (sick) sigma , etc

    And the beat goes on

    the ONE thing that has stayed is the sign here or you are fired yearly ETHICS COURSE.

    Wherein every grunt is told to NOT hire ex-government types, etc due to the Dryun-Sears issue.

    I’m not very optimistic re the 737 ramp up to the 40/month

    I’d tell albaugh to spend MORE time ON the 737 assembly line and in the manufacturing engineering and scheduling areas – absent the entourage of todies and local supervisors

    Encourage one on one with grunts of all levels- encourge grunt level to stand up and tellm him where his head is up . .

    eliminate at lest 50 percent of the power point rangers in Chicago-

  14. about ramping up production- a bit of history

    http://www.businessweek.com/magazine/content/03_50/b3862001_mz001.htm

    …. the year was 1997 or so ..

    from business week

    . . .Once he reached the top spot, Condit’s shortcomings as a manager became more worrisome. Within a year of taking office, Condit overreached in trying to step up airliner production even as the company was shifting to a more automated manufacturing system — the equivalent of replacing the engine on a race car as it wheels around the track at 200 mph. Boeing’s massive Seattle assembly lines nearly broke down in 1997, a year after he assumed office. By the time order was restored, the company had lost most of its credibility on Wall Street — a humiliation that seared the new CEO. In a meeting on Aug. 5 of that year — with more than two dozen senior execs in the board room of Boeing’s then- headquarters in Seattle — Condit complained about the embarrassment he had suffered while trying to soothe angry investors on the East Coast, recall execs present at the meeting. He had been called a liar by shareholders fed up with broken promises, the production fiasco, and a slumping stock. With tears welling, Condit vowed he would never suffer such indignity again. In a talk this year to plant workers, Condit took responsibility for the stumble, saying: “I give myself a very poor grade. It happened, and so it’s my responsibility. There’s my F.”

    Could the 737 ramp up to 40 be deja view all over again ???

  15. Don,

    Thanks for your point of view and suggestions. I am sure many of them are already under consideration.

    Relative to the ramp up of the 737, I do not believe it is analagous. Whether it will happen or not will be determined incrementally in the future. As mentioned previously, the most important challenge facing Boeing is their production line and supply chain.

    The Company is clearly focused on these elements and is not unaware of its history. Exercise your thoughts through your influence with your friends. It is in everyone’s best interest that this phase is successful

  16. This is in regard to the 737 lines (not 787 et al). BA attained some real efficiency gains with the moving lines. Whether the suppliers and BA’s own plant can ramp up to 40 will take some careful judgement. But the labor market where the existing plants are all have available skilled labor. As it is mid to long term (5 years) it cannot be done well with overtime.

    But it could be done with alternating a given shift 4-10, 4 days off, 3-12, 3 days off, then repeat. That puts the plant on near 7-24 production.

    Anyway we will see how it goes.

  17. The issue with all this investment into ramping up is of course whether it can pay back over the remaining backlog of the 737NG. So I guess we can see the volume of the investment being calibrated to the expected introduction date of a successor. The more Spirit etc. have to spend now, the longer it’ll take.

    But with both OEMs going to 40 now, my guess is that pricing will weaken, maybe significantly, and that may suffice to keep the old girls dancing for a while longer. One way of avoiding the investment in new clean-sheet. 😉

  18. I’m still amazed the market can absorb almost 1000 new narrowbodies per year after years of high production.

  19. Boeing concern in jacking up production is as much about retaining loyal customers as it is about reducing lead times.

    We should ask why the A320 range continues to outsell the 737NG & just why Airbus has has been so devastatingly successful at eating into Boeings long term loyal customer base.

    Importantly can Boeing ever regain the single aisle sector? We can but hope that one day we might we see a reversal of the continuing mass exodus to Airbus & live in anticipation of the rare event of Boeing prying a single aisle customer away from Airbus, now that surely demands an all new aircraft.

  20. In that article that Uwe quoted, there was a paragraph before that which I found much more interesting. It mentioned that the 777 develpment budget was $6 million and in the end, they actually spent $12 million. Unfortunately this information only came from close observers and Boeing refused to comment on the grounds that develpment costs are proprietary information.
    If this is true, why do I keep hearing that Airbus always hides its accounting while Boeing is “forced” to be upfront about its costs?

    • Link from this thread? replace Uwe with DonS! 😉

      Notice that the 777 essentially went without major delays, first flight to EIS in
      a timeframe that never enabled appearing at a big airshow 😉

      Nevertheless, I had a discussion elsewhere about develcost
      in summ and per frame in the break even cohorte.

      http://www.buffalo.edu/news/pdf/December07/ChicagoTribPritchardBoeing.pdf
      2007 @ 10++b$ ( with Boeing having offloaded a significant amount onto risk bearing partners. Wonder how those felt/feel the heat? and does it have impact
      on Airbus supply lines? )
      That amount should have long gone into the high 20b$ or even low 30b$ numbers.

      • Sorry Uwe and Don S.
        Did not pay as much attention as I thought I had!

  21. uhhh- the 777 numbers were BILLIONS with a B not millions.

    It has been rare in commercial airplane development history for decades to make ‘ breakeven’ on less than 400-500 shipsets.

    IF memory serves – it was in the early 90’s that the 737 reached ‘ breakeven ” after about 800 to 900 shipsets delivered, and the program was nearly killed.

    And in the mid to late 80’s, with about 500 747,s delivered, there were serious discussions as to when or if to close line(s) and whether or not to refurbish certain assembly tooling.

    During that time – the funds from some hidden contracts helped to keep things ‘positive”

  22. Don S,

    Check out the piece that Boeing just posted today on its website on the transition of the 767 line to Lean+ manufacturing or “on time production” method.

    It cites the success it has had with this method on the 737 and 777 models .

    It appears that this approach has been worked on over the years and they feel confident that it can be applied with success .

    Are you familiar with this process and do you think it will improve production and efficiency?

  23. I’m not aware that the moving line as on 737 has been incorporated on the 777. for example To get a good fit on 777 body sections for example, some fixed tooling using a hydraulic/electric/computer controlled ‘ squeeze into round ” method to align body sections is not fully adaptable to a moving line.

    As to ‘ lean’ manufacturing, some of those techniques were /have been incorporated on ALL Boeing lines. But cost of conversion- or major change is always a major factor relative to anticipatded future sales.

    BA is doing the partial moving line conversion on 767 in anticipation of tanker AND to make room for 787 surge line

    generally, lean techniques will improve things, depending on how and where incorporated- and how far back up the supplier chain they can be in corporated

  24. Don S.

    Aviation Week has published a piece on the changes at Everett. This will bring more clarity to the process and innovations incorporated.

    As a shareholder, I am hoping they will be constructive and successful.

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