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.