Boeing's Outsourcing for the 787 Dreamliner
September 29, 2006 | about: BABoeing’s (BA) latest and most promising entry in the commercial aircraft competition is the all new highly fuel efficient 787 Dreamliner. The 787 is made out of lightweight and highly durable composites incorporating advanced aluminum alloys and the conventional design sports sweptback wings with two pylon-mounted engines.Most Americans would agree that all Boeings are made in U.S.A. We were astonished to learn that Boeing will be responsible for approximately only one third (33%) of the aircraft’s production!
Here is a partial list:
USA, Wichita, Boeing - flight deck and fuselage
USA, Charleston, Global Aeronautica* - mid and rear section fuselage, tailplane
Canada, Winnipeg, Boeing – wings and fuselage fairings
Japan, Kawasaki – landing gear well, fixed wing section, forward fuselage
Japan, Handa, Fuji – center wing box
Japan, Nagoya, Mitsubishi – wing box
Australia, Boeing – moving leading/trailing wing edges
USA, Wichita, Spirit Aerosystems – nose
France, Latercore – passenger doors* Global Aeronautica is a joint venture between Vought Aircraft Industries and Alenia Aeronautica (Italy) representing a quarter of the planes production.
For more detailed information see this article from the Seattle Times.
A quick synopsis is as follows:
Assembly is in Everett, Washington, employing 800 to 1,200 people.
Boeing manufactures the tail fin at its Frederickson, Washington plant, ailerons and flaps in Australia and fairings in Canada. Due to political reasons, the wings are manufactured by Mitsubishi in Japan. The horizontal stabilizers are manufactured by Alenia Aeronautica in Italy and the fuselage sections by Vought in South Carolina, Alenia in Italy, Kawasaki in Japan and Spirit in Wichita. The landing gear is manufactured by Messier-Dowty in France and France’s Thales also builds the integrated standby flight display, electrical power conversion system and in-flight entertainment.
In the U.S., Honeywell and Rockwell-Collins supply the flight control, guidance and other avionics including dual head up guidance systems. Hamilton Sundstrand provide power distribution and management systems to the aircraft, including manufacture and production of the generator control units as well as integration of power transfer systems that can move power from the main/auxiliary power units to the required areas of the aircraft.
Just how much of the Dreamliner production originates in the U.S.A.? An educated estimate puts it in the 35-40% range of which almost a quarter of that is foreign owned. Taking into account the assembly line and the additional engineers at the Everett plant the 787 Dreamliner is in the best case scenario 45% American!
One might say that every 787 sold contributes to the American trade deficit. The simple calculation would be that every $100 million in sales is really $55 million in imports and $45 million in exports resulting in a $10 million deficit. This is incorrect math. The correct way of calculating Boeing’s foreign sales is that for every $100 million in exports, only $45 million is added value from the U.S. In other words, deduct the import component from the total sale value in order to derive at the export portion. Still, the export portion is a lot less than what most people think.
Now you have a better understanding as to why America has such a huge trade deficit even with all the export activity. It would be interesting to calculate the import component of other high flying exports, such as the Apple iPod, the contact lens industry; CooperVision, Bausch & Lomb, Johnson & Johnson, General Motors, Intel etc.
America has to get back to manufacturing more in house and that includes Boeing!
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A draft copy of this article was forwarded to Dave Dohnalek, IR at Boeing. Boeing decided not to respond.
Disclosure: This article is by a CrossProfit analyst for information purposes only. No financial opinion is stated. Unless explicitly stated otherwise there are no conflict of interests. CrossProfit is not affiliated with Seeking Alpha or Yahoo! Finance.
