By Scott Hamilton
Feb 19, 2020, © Leeham News: Boeing says it is helping some suppliers with liquidity while the 737 MAX is grounded.
Other suppliers complain that Boeing is dunning them for alleged bad workmanship, squeezing cash. Still others say Boeing proposes not paying them for MAX parts until every regulator in the world recertifies the airplane. There are some 80 regulators who have to approve restoring the MAX to service.
And one Tier 1 supplier, Leonardo, sued Boeing Dec. 23 for withholding $20m in payments for 767 slats. Boeing alleges faulty workmanship. Leonardo says Boeing won’t provide documentation of this claim.
(US District Court for Western Washington, 2:19-cv-02082-JLR.)
Boeing’s tactic of withholding payments for claims against future invoicing was echoed by some of the suppliers attending the annual conference of Pacific Northwest Aerospace Alliance Feb. 4-6. Some complained Boeing is using them for its “bank.” It’s a complaint of long-standing even if for different reasons.
The Leonardo lawsuit outlines in detail the broad process suppliers at the PNAA conference expressed to LNA.
In its lawsuit, Leonardo claims that Boeing is unilaterally alleging defects in parts Leonardo produces. As a result, Boeing is unilaterally subtracting the monetary damages Boeing asserts from future Leonardo invoices.
The Italian company, which has been a supplier to Boeing for 40 years, claims Boeing refuses to document its claims about shoddy workmanship and the costs to bring the parts into conformance. Leonardo counters that any defects for the 767 parts are due to flaws in Boeing’s own materials.
Boeing invoiced Leonardo in August, charging the company more than $26m for “slat cost recovery”. The invoice was for a two week period ending Aug. 20. Boeing demanded Leonardo pay the invoice within 30 days or Boeing would apply this amount against Leonardo’s next invoice.
Boeing’s account payables typically have a 90-120 pay period to its suppliers.
A second claim for $33m was sent a month later by Boeing and were applied against every part Leonardo makes for the 767, over and above the disputed slats.
Leonardo said Boeing never complained about product quality, in violation of notices required under contracts.
Boeing’s response, filed Feb. 10, denies Leonardo’s allegations in the underlying claims. It denies that it never alerted Leonardo to its concerns.
Leonardo’s lawsuit is here: 440969494-Leonardo-vs-Boeing
Boeing’s answer is here: Boeing Answer