OUTSOURCING A ONE WAY TICKET TO LOSING ALL CONTROL

Poor old Boeing; by the time it settles the penalty payments with all the carriers who will be waiting additional years to take delivery of the 787, it may be years before they are able to declare a dividend. Added to this, fortunately on a smaller scale is the same set of circumstances for the 747-800. They are currently recording multi $billion charges against their bottom line in readiness for the $billions they will be paying in penalties for delays to both aircraft.

Manufacturing which used to take place in their own plants, was out-sourced to a mish-mash of “wanna-be” aircraft suppliers. Sure by tendering the supplies, Boeing initially was able to save money by choosing the cheapest bidder and also more accurately determine its overall costs, because cost over-runs would not be their responsibility. Three years ago they were laughing all the way to the bank. Like the good American corporation it is, it dumped a huge part of its Seattle workforce and went on to sign more contracts with foreign companies than local suppliers. What a mess has ensued. When they started final assembly on both aircraft at their Everett plant, nothing fitted! For instance, with the 787’s, the front of the fuselage made in Sweden could fit to the mid section that was made by Kawasaki in Japan! The measurements of the flaps made in Australia meant they could not be attached to the wings made by Mitsubishi in Japan.

If it weren’t for a low dollar versus the high Euro (stopping airlines substituting for Airbus equivalents) coupled with the fact most airlines were thrilled to bits in this current environment not to be writing out checks and taking delivery of their orders, this total Boeing debacle could have easily sent the company under. I hope GM learns a lesson from this by taking Delphi lock, stock and barrel back under its wings and sources everything it can from within. Outsourcing is nothing but a recipe for disaster. Already Boeing has seen the error of its ways and is struggling to get everything back on track by taking back control of much of the manufacturing activity as it is able to do at this late stage. Being the manufacturer and not the assembler provides for greater accountability of the processes, but moreover leads to greater customer satisfaction. It is a case of being able to maintain full responsibility for the quality of the product.

Tags: 787, 787-800, Airbus, Boeing, Dreamliner 787, GM