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NightmareLiner: Boeing Ignored Skeptics, Outsourced Production of 787, Put 1000s at Risk

UPDATE: The FAA has grounded the Dreamliner in the U.S.

If you take a look at the last few years, you’d think industry giant Boeing has been as much a pioneer of union-busting as it has been of aviation.  After infamously moving an entire production facility from worker-friendly Washington to “Right-to-Work” South Carolina in order to break labor contracts, the company became the renewed posterchild for anti-unionism and the race to the bottom in 2012.  

This week, though, the company’s desire to save a few bucks on the backs of workers has put them in an undesirable predicament.  The company’s newest creation, the 787 Dreamliner, which was set to change international flying forever, has hit a major snag.  Karma (not an airline competitor, we’re talking the buddhist kind) is having a field day with the austerity practices of Boeing as it seems much of the work they outsourced to create the Dreamliner at bottom-dollar cost is coming back faulty and will cost the company billions.  

According to the Los Angeles Times:

The next-generation airliner is billions of dollars over budget and about three years late; the first paying passengers won’t be boarding until this fall, if then. Some of the delay stems from the plane’s advances in design, engineering and material, which made it harder to build.” “But much of the blame belongs to the company’s quantum leap in farming out the design and manufacture of crucial components to suppliers around the nation and in foreign countries such as Italy, Sweden, China, and South Korea. Boeing’s dream was to save money. The reality is that it would have been cheaper to keep a lot of this work in-house.”

Behind schedule and over budget? Isn’t that what Boeing claimed their union workforce to be?  USA Today explains the delay:

“Parts for the jet are made by 52 suppliers scattered around the globe. And, in a first for Boeing, large sections of the jet are built by these outside vendors and then cobbled together. That process, aimed at saving money, wasn’t as smooth as Boeing had hoped.”

In retrospect, the decision to outsource production on what was viewed as the company’s “next big thing” appears foolish at best. Boeing, if recent history is any indication, will be unwilling to learn from it.  Hopefully it can act as parable for other companies who hoped to mimic Boeing’s approach.

Speaking to college students in Seattle, Jim Albaugh, the company’s commercial aviation chief, admitted that the “experiment” was failing.  He would not admit, however, that the skilled laborers the company previsouly employed would have done a better job.

We gave work to people that had never really done this kind of technology before, and then we didn’t provide the oversight that was necessary.  In hindsight, we spent a lot more money in trying to recover than we ever would have spent if we tried to keep many of the key technologies closer to Boeing. The pendulum swung too far.”

Following the second instance of a Dreamliner having problems at Boston’s Logan Airport, the FAA ordered a full investigation. The news then got worse internationally.  A Dreamliner was forced to land quickly after takeoff in Japan forcing All Nippon Airways to order all 17 of its 787’s grounded until further notice.  Richard Aboulafia, a senior analyst with the Teal Group in Fairfax, Virginia, told BBC News that the recent events are likely to tarnish Boeing’s reputation indefinitely:

“You’re nearing the tipping point where they need to regard this as a serious crisis.  This is going to change people’s perception of the aircraft if they don’t act quickly.”

The incidents, coupled with the large loss of money, have caused Boeing’s stock to fall by 3.3 percent or $2.50 a share.   

People close to the situation note Boeing’s indignance during the lead up to the now-crisis. From the LA Times:

Boeing can’t say it wasn’t warned. As early as 2001, L.J. Hart-Smith, a Boeing senior technical fellow, produced a prescient analysis projecting that excessive outsourcing would raise Boeing’s costs and steer profits to its subcontractors.

Among the least profitable jobs in aircraft manufacturing, he pointed out, is final assembly — the job Boeing proposed to retain. But its subcontractors would benefit from free technical assistance from Boeing if they ran into problems, and would hang on to the highly profitable business of producing spare parts over the decades-long life of the aircraft. Their work would be almost risk-free, Hart-Smith observed, because if they ran into really insuperable problems they would simply be bought out by Boeing.

What do you know? In 2009, Boeing spent about $1 billion in cash and credit to take over the underperforming fuselage manufacturing plant of Vought Aircraft Industries, which had contributed to the years of delays….

Hart-Smith added,

”I warned Boeing not to make the same mistake. Everybody there seemed to get the message, except top management.”

The company’s unions have also kept singing an anti-outsourcing chorale. “We’ve been raising these questions for five years,” says Tom McCarty, the president of the Boeing engineers’ union. “How do you control the project, and how do you justify giving these major pieces of work to relatively inexperienced suppliers? There’s no track record of being able to do this.”


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