Wednesday, September 12, 2007

Boeing White Knuckle Approach

Boeing's (BA) CEO Jim McNerney voiced confidence Tuesday that the airplane maker will be able to deliver the first 787 on time next May but acknowledged that there is now no margin for error in order to keep to that schedule. The comments were made at a Morgan Stanley conference in Dana Point, Calif. It has been six days since Boeing said the first test flight was pushed back to mid-November or mid-December due to complications with final assembly and finalizing flight-control software.

Jim McNerney also said Is there room for major glitches at this stage? The answer is no,...We're tight. ... We're down to the program having to go by the book."

Aircraft are incredibly complex products. Aircraft manufacturers cannot tolerate a scrap rate like other manufacturing entities. Undoubtedly the delays were unexpected. Delays are always unexpected. If you were expecting a problem you would have adjusted the schedule for them.

Why set the stock up for a disappointment? Everything has to go absolutely right from now on. If they pull it off then the stock shrugs and says well of course. If there are future problems everyone remembers management saying no problems its going to be OK and then it was not OK. Stocks do not go up in value when news of this nature comes out.

The major problem revolves around bolts made by Alcoa (AA)and others. The bolts are called fasteners and are made from Aluminium and Titanium. The problem has been publicly discussed for the past six months and is still a problem.

Scott Carson ,chief of Boeing's commercial plane unit, is saying the fastener industry consolidated post 9/11 and did not predict the rise in aircraft manufacturing. But airline orders are huge business news and usually trumpeted to the high heavens. Everyone that needs to know knows when you guys get an order for one of those babies.

By the way when the first 787 was rolled out for the world to see it had fake fasteners on it. These fasteners are still being removed and replaced by proper fasteners. So the con was on.

These guys are one glitch away from disclosure investigations and lawsuits. There is always a glitch in a big project. Hence the white knuckles. Someone did not check supply or was lied to about two years ago. Did someone tell his boss and did it get up the management chain properly. Airbus cannot believe their luck.