Boeing conference call with 787 update
Boeing held its 2012 earnings call, and with it officials offered an update on the 787 situation.
Jim McNerney (CEO) (JM)
Greg Smith (CFO) (GS)
JM: 787 Update–
Job one on 787 is supporting the investigation on the 787 battery incidents. We rigorously support the process. We do believe good progress is being made in narrowing down the cause. Assigned hundreds of experts within Boeing, brought in outside experts, supporting NTSB, JTSB. We will get to the bottom of this and in so doing restore confidence in the 787. Thanks engineers and all others in investigation. We’ve seen the airplane in service for 15 months and it delivers on promises.
- Progress continues on 787-9, with assembly beginning in mid-2013. First customer delivery on schedule in early 2014.
- The case for the 787-10 has strengthened with a potential launch this year.
- We have more work to do on 777X and this is a big part of the focus this year.
- Our 2013 guidance assumes no significant financial impact due to 787 issues.
- Expect 635-645 deliveries this year, including 60 787s via rate hike and the reworked airplanes. Deliveries from Everett Mod center will decline.
- JM: 787 issue is not impacting engineering resources on other programs. This is a highly compartmentalized issue, using teams from supply chain and from elsewhere in Boeing. Not drawing from critical resources from any other programs.
- JM: The drain on resources is not significant. I cannot talk about specific paths of investigation, but there is a comprehensive effort of root cause. I am confident we will identify root cause. When we know the answer, we will know the answer and act on it.
- GS: We’re going to continue to produce and do rate breaks on 787 this year. There will be fewer Everett Mod Center deliveries this year as rework airplanes descend toward aircraft with greatest work requirements. Introducing 787-9 will somewhat offset delivery stream. Reaffirms plans for rate of 10 per month by year end.
- JM: Our assumption is that we will understand root cause side-by-side with regulatory agencies. I don’t want to prejudge what form entry into service will be acceptable to them. Two incidents were very different. It doesn’t lead me to prejudge exactly what will happen.
- GS: Plan is to have all EMC airplanes completed by 2015.
- JM: MAX development is going very well. Hitting all benchmarks at or slightly in advance of schedule. Engine partners are hitting their benchmarks. Confident the airplane will be delivered on time and at promises. 787-10–we’ve been conditionally offering the airplane and the response has been very well. The airplane will be a winner at a price and value equation that makes sense for Boeing and customers. Won’t prejudge a launch date. 777X: 777 is 20 years old. We are focused on offering technical solutions on an already market-leading airplane. Most likely design in some increased capacity, composite wings, new engines, some other work. We’re trying to put some final touches on the final touches. Trying to get business plan where it needs to be and then will conditionally offer it to customers.
- JM: As derivatives go, 777X will be a significant amount of work. This will be third or fourth generation of composite wing, on a scale not done before, and has significant challenges. This will be an advantage to press in different ways.
- JM: Pipeline of 747-8 is pretty good. We are mindful of softness in the cargo market. We are getting volume in the old fashioned way and that is finding customers and working with them. We will be taking a look at it every quarter.
- JM: Replaced batteries occur every day on all types of airplanes. Replacement cycle on 787 has been for maintenance reasons. We’re not aware of any replacement for safety concerns. Replacement rate is “slightly higher” than predicted.
- JM: A possible strike by SPEEA and impact on 787 is highly hypothetical. I think we will have enough experts available if it goes that far. Hopeful for settlement. This hasn’t presented itself as a real issue yet.
- JM: 787-9 has a lot of unique parts when compared with the 787-8.
- JM: Nothing we’ve learned yet that we made the wrong choice on the battery technology. We have to get to the root cause. There’s nothing we’ve learned yet to question our choice.
- JM: We have done a lot to increase the visibility down into the supply chain, to identify bottlenecks and quality issues. My view is we want to work more efficiently with suppliers to increase quality, reduce time. It is not a cost squeeze initiative, it is an improved process initiative. Costs will be reduced in the process.
- JM: We do of course rely on our partners for quality control but if we missed something we will fix it.
- JM: Charleston is doing a hell of a job and keep charging. Confident will hit target of three a year by end 2013.