July 28, 2011 in Business

Boeing CEO’s remarks raise questions on plant site for 737

Dominic Gates Seattle Times
 

SEATTLE – Boeing Co. Chairman and Chief Executive Officer Jim McNerney jolted listeners on a morning conference call Wednesday when he said the planned revamp of the 737 single-aisle jet with a new engine won’t necessarily be built in Renton, Wash., or in the state’s Puget Sound region.

Immediately afterward, Boeing public relations staff scrambled to soften the impact of that suggestion.

“We haven’t made the final decision about where we’re going to produce the re-engined airplane,” McNerney told Wall Street analysts and journalists on Boeing’s conference call to discuss quarterly earnings.

“There would be major investments (needed) in Renton beyond the currently planned production rates,” he said. “Until we sort that all out, we can’t confirm where we’re going to put it precisely.

“We have other options and we’re going to study them all as we think this through,” McNerney said.

One option he specifically mentioned is Charleston, S.C. Whether Charleston might get the work, he said, “would depend as we studied it how competitive they are as compared to Renton or compared to another site.”

Yet soon after the teleconference ended, the top public relations executives at the local Boeing Commercial Airplanes division called to “add context” to those remarks.

McNerney “didn’t intend to signal that anything would move out of Puget Sound,” said Mary Foerster, top communications executive for Boeing Commercial Airplanes CEO Jim Albaugh.

Senior Boeing executive Mark Hooper said that Albaugh personally softened the company message in an address to a small number of employees right after the earnings call ended.

“Jim (Albaugh) talked to our employees,” said Hooper. What Albaugh conveyed, he said, “was a lot less threatening than our chairman may have framed it earlier.”

Renton is by far Boeing’s most efficient assembly plant, currently rolling out more than 31 jets a month. The company plans to raise that to 42 per month by the first half of 2014.

A finely tuned 737 supply chain converges on Renton, including the delivery of entire fuselages by rail from Wichita, Kan.

That’s why it came as a shock to hear McNerney raise the possibility that the upgraded plane might be assembled elsewhere, a shift that would likely be expensive.

When McNerney was pressed on the call to offer some commitment to his workforce here, he said Renton has a “strong case” to continue building the 737s, adding that it is “one of the great aerospace factories in the world.”

Boeing is contemplating raising 737 production rates as high as 60 airplanes a month in the latter part of this decade. Two assembly lines there can already go to the 42 per month rate.

A third line is currently used only to assemble the P-8 military version of the 737, built as an anti-submarine plane for the Navy.

The rate on the P-8 assembly line is set to be no more than a couple of military jets per month. The most obvious and probably the cheapest way to get to a total rate of 60 jets per month would be to upgrade that production line to accommodate both the commercial and military versions of the jets, and to have it pump out planes at a rate about equal to the other two lines.

But McNerney insisted that because Boeing will have to make “significant investments” to upgrade tooling and factory space, this is something that cannot yet be decided.

“After 42 per month, we do run into some challenges if Renton were the choice,” McNerney said. “We have to study that and figure it out.”

Hooper said later that McNerney is simply constrained in making firm commitments until a definite plan for producing the re-engined 737 is agreed upon internally.

“People ask, ‘Why aren’t you


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