“Who’s going to fail?”

By Scott Hamilton

Feb. 5, 2020, © Leeham News: “Who’s going to fail?”

This is a key question on the sidelines of the annual Pacific Northwest Aerospace Alliance conference in Lynnwood (WA).

The question, of course, related to the small- and medium-sized suppliers caught up in the grounding of the Boeing 737 MAX.

Uncertainties

As the grounding approaches its first anniversary, March 13, uncertainty, the lack of information and stress permeates the supply chain.

The parties spoke with LNA on the condition of anonymity in order to speak freely.

Speaking with suppliers here, the common thread is that there is little communication from Boeing—and what there is remains ambiguous.

Some of these are co-suppliers with Airbus and/or other manufacturers.

As these suppliers, described privately by one of the speakers as $300m-$400m in revenue, bend under the strain of the MAX grounding, Airbus is worried that its common suppliers with Boeing could buckle.

There is a broad understanding that Boeing has few answers, since it is not in control of its own destiny. This is up to regulators, specifically the Federal Aviation Administration. The FAA is the lead oversight agency and will be the first to recertify the MAX. Whether the other global regulators recertify concurrently or consecutively is secondary. The FAA must act first and it is this action that will dictate when Boeing restarts production.

Boeing said it plans to resume production a “couple of months” before certification. The best guess, and that’s all it is, is that production will resume at a low initial rate in April.

Resuming deliveries to Boeing

One small supplier said it was notified by Boeing to resume parts delivery in March. But this supplier does not have any indication from Boeing when production will resume.

Several suppliers said they won’t believe production will resume until Spirit Aerosystems begins shipping 737 fuselages to Boeing.

 

10 Comments on ““Who’s going to fail?”

  1. How many suppliers will be able to shift production to parts required for refurbishment and repair as opposed to parts for new aircraft ?

    After all, there are potentially 1,000 to 1,300 single aisle aircraft that are going to be in service a lot longer than expected.

    I understand that Boeing is trying to get that replacement business in the future, but don’t the older 737 fall into a period when sub contractors could make money selling the parts as spares ?

    • Lots of parts arent generally replacement items, the lions share of the maintenance money goes on major parts such as engines , undercarriage and avionics.
      This is a list of companies that produce mechanical “components” for the 737
      http://www.airframer.com/aircraft_detail.html?model=B737#Mechanical%20Components
      A name that jumped out was Curtiss-Wright which produces flap track assemblies. Names from the beginning of aviation who are down to this sort of thing.

  2. Imagine if Airbus has to provide bridge funding, so that suppliers can pull through the MAX grounding disruption. That would really get the point across, as to how tightly integrated the aviation industry is.

    • Not going to happen like that. If the suppliers have future contracts from Boeing they should be able to get money from a range of credit providers – interest rates are incredibly low as well- that is unless they have ‘maxxed out’ their credit already. Remember the production complete halt is only a short period before it begins again
      However Boeing will find its suppliers will be asking for substantial price increases to cover the reduced volume for a while and to keep those prices to cover the previous losses.
      Boeing has been winning profit wise from raising production rates over a long period, the rate reductions have aligned more or less over a similar period for its 3 main cash earners.

      • “Not going to happen like that.”

        Already happened going through the 787 debacle.
        Afair Airbus had to prop up companies that had been beggared by Boeing.

        • I wonder how many of those suppliers wish they had made themselves Airbus-sized and forgotten all about Boeing, simply for the stability?

          It costs money to survive when you have an unreliable major customer. A lot of US car parts suppliers stopped doing business with GM, Ford after they’d started supplying Toyota, Honda, etc. for these sorts of reasons.

        • I dont know where it says Airbus supported Boeings suppliers during the 787 troubles.
          Instead I found this from the very knowledgeable Steve Denning at Forbes – a ‘management guru’ in his own right
          “To regain control of the development process, Boeing was forced to buy one of the key Tier-1 suppliers (Vought Aircraft Industries) and supply expertise to other suppliers. Boeing also had to pay strategic partners compensation for potential profit losses stemming from the delays in production.”

          and the other support:
          “When the subcontractors didn’t perform the necessary coordination, Boeing had to provide the support anyway. “Boeing sent hundreds of its engineers to the sites of various Tier-1, Tier-2, or Tier-3 suppliers worldwide to solve various technical problems that appeared to be the root cause of the delay in the 787’s development”
          https://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-at-boeing/

          It seemed that Boeing had paid lip service to the deep changes needed in the company and the supply chain to make outsourcing work for a brand new plane like the 787, its repeated the process for the 737 Max but this time in playing lip service to ‘agile management’ in moving quickly to develop a major derivative.

          • That is PR talk. Pravda.
            read between the lines for the truth.
            Boeing technical help was often needed as initially interface definitions had been “done by MBA”.
            i.e. Boeing had to do the work they should have done up front.
            Then Boeing beggared some suppliers and then bought them up cheap. Brilliant move.

  3. Over he last 15 years, once 100% Boeing oriented, Spirit Aerosystems bought themselves into Airbus A320, A350 and A220 programs. Looking back, broadening their scope was a good long term investment strategy.

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