Boeing Co. will stop new production of 747 jetliners for 20 days, and slow some 737 production to try to unscramble problems caused by trying to more than double the number of aircraft it makes.
The 737 production also is being slowed because flight tests have revealed design problems in the newest version of the plane, Boeing said Friday.
“It’s a good news-bad news situation for us here today,” company spokesman Brian Ames said. “It’s very disappointing for us to be this far behind and miss deliveries with customers, but we feel like this is a good plan.
“It’s probably a months-long recovery process. But when we’re through it on the other side, we’ll be the right choice for airlines to make.”
Boeing is in the midst of boosting its production from 18 planes a month to 43. The task has been complicated by parts shortages and a lack of skilled labor, on top of the logistical difficulties of such a massive undertaking.
Peter Jacobs, an analyst with Ragen McKenzie in Seattle, said Boeing officials told analysts that straightening everything out could take until mid-1998.
“To get all production and parts suppliers back in sequence, you’re probably looking at six to nine months,” he said.
Last month, Boeing said the rapid production increases would force it to delay deliveries of a dozen planes to 10 airlines. That was on top of seven deliveries delayed earlier.
“Boeing has been going through all the growth pains associated with ramping up from a production schedule of 18 airplanes per month just 18 months ago to 40 planes per month today,” said Ron Woodard, president of Boeing Commercial Airplane Group. “As a result, we face the tremendous task of producing and delivering our products as promised.”
Boeing said parts shortages are the most severe problem and are affecting all Boeing models, but especially the 747 jumbo jets and new 737s.
It currently produces four 747s a month and 21 737s.
A commercial jet can contain 3 million parts, and assembling them is a carefully choreographed process. When parts are late or workers unavailable, jobs on the production line have to be done out of sequence, which affects other work, and rapidly magnifies the problem.
Boeing spokeswoman Susan Bradley said no layoffs are anticipated since workers will be hustling to get back on schedule. To meet a recent flood of orders, Boeing has hired 32,000 people in the last 18 months and will continue hiring, she said.
Boeing did not say how many more aircraft delivery dates might be missed, or how much it might cost the manufacturer in contract penalties.
Bradley said Boeing would incur some penalties for the third quarter, but would not say how much. Boeing has a 30-day delivery window in its aircraft contracts before it incurs a financial penalty, she said.
Jacobs said Boeing would not tell analysts how large a hit it might take on deferred payments and contract penalties. “Sufficient to say though, earnings estimates are coming down,” he said.
“We have determined that the most effective recovery measure for the 747 is to immediately stop the production line for 20 manufacturing days,” said Bob Dryden, executive vice president of airplane production. “This will allow us to complete those jobs that have fallen behind schedule.”
Ames said the company now plans to deliver an estimated 335 jetliners this year, compared with 340 to 350 projected earlier.
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