Boeing Production Problems Easing Aerospace Giant Claims Progress In Overcoming Costly Troubles

Boeing’s top executives said Wednesday that a plan to recover from the production mess that stopped two jetliner assembly lines last fall is ahead of schedule, and the company is trying to keep it that way.

The officials told reporters that overtime is down, parts shortages are easing and production is set to increase.

“We’re watching everything to make sure that we don’t have those tangles,” Ron Woodard, Boeing Commercial Airplane Group president, told a teleconference.

Boeing’s attempt to more than double its aircraft production over two years to 48 planes a month by mid-1998 resulted in raw materials and parts shortages. Productivity also declined as thousands of new employees had to be trained.

Boeing was forced to halt assembly lines for 747 jumbo jets and new-generation 737s for a month last year to get out-of-sequence work back in order. The company has said the production woes would cost it $2.6 billion, including more than $1.8 billion written off last year.

“Factory operations are, in general, getting back on track,” Woodard said.

Overtime, he said, is still too high, and “our biggest risk continues to be our struggles with the 737 new-generation program,” but the company is on schedule to deliver 115 jetliners this quarter, as planned.

Boeing is bringing out four new models of its workhorse 737. Problems were found during flight tests last fall on the first of those planes, the 737-700, and the first 28 of those aircraft must be retrofitted.

Brian Ames, a company spokesman, said overtime was down from 21 percent on Oct. 1 to 16.9 percent today.

The number of parts shortages declined from 2,600 in October to 1,555 on Jan. 27 and is now 1,653, still better than the initial recovery target of 1,879 for this date, Ames said.

“We expected it (the January-to-February increase) because of the production rate increases that have occurred,” he said.

The number of jobs behind schedule fell from 53,885 in October to 18,900 a month ago and 18,200 on Wednesday, beating the target of 23,500 for this date, Ames said.

Boeing is increasing its production of 7-series aircraft from an average of 18-1/2 planes a month in early 1996 to 43 a month by this July. Overall production, including McDonnell Douglas passenger jets, will go to 48. Boeing acquired McDonnell Douglas last year.

Boeing currently produces 14 older-version 737s and seven next-generation planes a month. In April, that will increase to 24 planes - 10 older-model 737s and 14 next-generation. Later in the year, Woodard said, the mix will change to 21 new-generation and three older-version planes.

By mid-year, Boeing will increase both its 747 and 757 production rates from four to five a month. Production on 767s will stay at four a month, while 777 production will dip from seven to five a month this spring. Woodard, however, said the company is considering bringing 777 production back to seven a month by the end of the year.

Production of McDonnell Douglas jets, which are built in Long Beach, Calif., will stay steady at about five a month.

Phil Condit, Boeing chairman and chief executive officer, said the company was changing part of its executive compensation plan. The change, which will affect about 1,500 executives, won’t require a shareholder vote, he said.

The primary difference will be to switch from stock options, which vest after a certain time period, to “performance shares” which are awarded only if Boeing’s stock reaches a certain level.

“If the stock underperforms, you don’t get ‘em,” Condit said.

While Asia’s financial problems have hurt airlines there, he said, “our long-term perspective is still very positive” for the region.

Woodard said Boeing’s earlier prediction that Asian airlines may postpone approximately 60 planes over the next three years still stands.