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Boeing purchases East Coast plant

Wed., July 8, 2009

Move fuels fears that it will abandon region

SEATTLE – Boeing will pay Texas-based Vought Aircraft Industries $1 billion to buy the 787 rear fuselage plant in Charleston, S.C. In addition to $580 million in cash, Boeing is forgiving $422 million of advance payments it made to Vought.

Removing a major Dreamliner partner and taking over the operation is a dramatic move forced by Vought’s inability to fund the further substantial investment needed for the troubled new jet program.

Following the acquisition a year ago of Vought’s share of the adjacent mid-fuselage assembly plant in Charleston, a sizable part of Boeing’s strategic plan to outsource much of the Dreamliner production work is now reversed.

Yet however unplanned, the upshot is that Boeing Commercial Airplanes now for the first time in its history owns substantial aircraft assembly facilities on the East Coast.

That raises the specter of future final assembly work – either for a second 787 production line or for the next new airplane after the 787 – potentially going there instead of to the company’s factories in Everett or Renton, Wash.

Business and political leaders in the Puget Sound region reacted accordingly.

“Unless things change, Boeing’s future will be outside the Northwest and that will be devastating to the Washington economy,” warned John Stanton, chairman of the Washington Roundtable, a business group.

“My father worked 25 years for Boeing and I know firsthand just how skilled the work force is, but Boeing customers are telling the company that workers need to be reliable as well as skilled. Airlines simply can’t make billion-dollar decisions on new aircraft and then face the prospect of delivery delays because of labor disputes.”

Gov. Chris Gregoire said in a statement that the deal “underscores that Boeing wants to ensure that it manufactures the 787 Dreamliner as efficiently as possible.”

But she added that when Boeing Commercial Airplanes CEO Scott Carson informed her of the Vought purchase Monday, “he assured that no decision has been made on a potential second line for the 787, and that today’s announcement doesn’t have anything to do with that.”

Vought’s part of the 787 program has been fraught with problems both technical and financial. The Dallas-based aerospace supplier is owned by the Carlyle Group, a private equity firm, which declined to put further money into the company and has been seeking to sell all or part of Vought for at least a year.

Vought chief executive Elmer Doty said in a statement Tuesday that “the financial demands of this program are clearly growing beyond what a company our size can support.”

The 787 rear fuselage plant in Charleston was shopped around unsuccessfully to other potential buyers, including another major 787 partner, Spirit AeroSystems. Spirit operates the former Boeing parts plant in Wichita, Kan., where it manufactures the 787’s front fuselage section.

The plant makes sections of the 787’s fuselage between its wings and tail that are made primarily from lightweight carbon composites.

The next-generation aircraft that has been hampered by repeated delays due to production problems that have cost Boeing billions of dollars in anticipated expenses and penalties.

After the transaction, Boeing said, Vought will continue its work on many Boeing programs, including other components of the 787, as well as parts of the 737, 747, 767, 777, C-17 and V-22 through operations located elsewhere.

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