Aug. 12, 2015, © Leeham Co. Mitigating risk and taking lessons learned from across the entire 7-Series families are key to improving productivity, cutting costs and
preparing for the transition from the 737NG to the MAX and from the 777 Classic to the 777X, the chief financial officer of The Boeing Co. said today at the Jefferies Global Industrials Conference.
Greg Smith told the conference, which was webcast, that putting all new airplane development under one department enables a common understanding of what’s going on across the product lines and therefore the new product lines benefit to reduce risk and create efficiencies.
The lessons learned from the 787 lines in Everett and Charleston “are very encouraging,” Smith said. “We are getting better learning from those efficiencies that transition to other parts of the business.”
Boeing is shutting the 787 surge line in Everett because production on the line is more inefficient than the main Everett and Charleston lines.
“The surge line has reached a point where it’s more inefficient than efficient,” Smith said. “We’ve reached a point of maturity in production where it’s clearly not needed. Getting the maturity of those two lines up gives you the confidence to shut down the surge line.”
This opens the space to begin production of the 777X in 2018 and 2019, avoiding disruption for the current 777 Classic line and mitigating risk. Similarly, the decision to begin production of the 737 MAX on a separate line at the Renton factory avoids disrupting the efficiencies there, particularly as 737 production prepares to go up in rate.
Still, Smith said getting costs down and efficiencies up on the 787 line remains a challenge.
There is no question that getting the costs down on the 787 per unit is major objective, he said. “Not all the expectations we’ve set internally have been met” but the company is making progress.
Smith said there are about 1,100 projects relating to productivity and flow time, ideas that originated internally or from supply chain. “Now that we’re stable, we can look at these efficiencies that you can’t see when you’re going up every six months in rate.”
Demand remains robust
“It’s pretty robust demand around products and services. A lot of it goes to growth but a lot of it goes to efficiency. Our competitor brings efficiency. These are very efficient aircraft. Forty to 50% of market is coming from replacement. Operating costs and life cycle improvement is significant and driving demand to all of us,” Smith said.
“I feel pretty good about the backlog,” Smith said. Boeing looks at the diversity by customer, by geography and replacement. “We’re not seeing a slow down in demand.”
Smith also said that the current fuel price environment isn’t having an effect on demand.
“You go back over time and look for a correlation between oil prices and orders and you won’t find it. It goes back to technology we’re bringing to the market,” he said. These are the fundamentals that give “confidence you’re bringing the right product to the market.”