Sept. 14, 2020, © Leeham News: Boeing’s South Carolina 787 final assembly plant has made its case whether to consolidate production in one location, or not.
The conclusion favors retaining dual assembly lines, retaining one in Everett.
This click-bait lead doesn’t mean Boeing SC management favors retaining dual assembly lines. Far from it.
In the course of just two weeks, reports emerged about the grounding of eight 787s due to manufacturing defects from the Boeing SC plant; the possibility that more than 100 airplanes are potentially affected; and there is potentially a defect in the mating of the vertical fin to the fuselage.
Quality control at the Charleston plant has been a major issue since it opened, even after Boeing bought it from Alenia and a joint venture between Alenia and Vought. Employee turnover at Charleston historically is higher than desired, which hurts QC.
The Everett (WA) plant, with its long-time workers, have fixed traveled work from 787s emerging from the Charleston plant since inception. Some airlines refuse to take delivery of airplanes assembled in Charleston. (The Charleston Post and Courier last year published a damning story about this, complete with documentation about the poor QC.)
The Wall Street Journal reported last Monday—the Labor Day Holiday in the US—that QC issues at Charleston going back a decade are now being reviewed by regulators.
Everett’s workers are unionized by the International Association of Machinists District 751, but this isn’t a union story. This is a story about better performance in assembling airplanes and serving customers.
Not that Everett hasn’t had its own QC issues. But they pale in comparison with Boeing SC.
Last Tuesday, Boeing said inspections of the 787s were slowing deliveries. In today’s COVID environment, this really isn’t an issue, but it’s indicative of the underlying Boeing SC problems.
Boeing’s CEO, David Calhoun, said on the 2Q2020 earnings call in July that a study is underway to decide whether to consolidate 787 production in one location. From a pure dollars-and-cents standpoint, it makes sense to do so. With the production rate falling to 6/mo next year, keeping two lines open is problematic.
But there are larger issues. There’s the overhead cost allocation at Everett assigned to the 787 line. The remaining 747, 767/KC-46A and 777 lines must absorb these costs. The 747 line closes in 2022 and the 777-X won’t deliver until the same year. The 777 line is going to a rate of just 2/mo. Reallocating costs from the 787 line (and the closing 747 line) to the 767/777 lines will likely put the entire Everett plant into a loss-making position. (Boeing warned in its 2Q quarterly filing declining production rates could put the 777X and 787 into a forward loss position.)
Keeping customers happy with high quality airplanes upon delivery is important, and Boeing SC falls short on this.
Finally, keeping Puget Sound’s supply chain healthy (or at least in survival mode) is also important.
Boeing SC proved over and over and over again that it’s not up to the task of having full responsibility for the 787 program.
For the long-term health of the program—and the company—splitting assembly between the two sites makes the most sense, despite short-term losses.