Tuesday, July 07, 2009

Boeing Buys Out Vought/Problem Child

Boeing (BA) buys another facility from Vought. The headlines from Boeings press release claim that this will give them more control over production. This follows on the heels of another purchase from Vought that also supposedly allowed more control.

What is clear is that Boeing does not understand how to handle the sub-contractor culture and craves more control. Supposedly this means that companies with multi-million contracts are not meeting spec’s on the 787 Dreamliner. Strange most companies with multi-million dollar contracts and their corporate reputations on the line turn themselves inside out to satisfy the customer.

Pundits point to the increasing fixed cost that Boeing is adding. This is very true as the program seems to be consuming enormous amounts of capital just before it’s supposed first flight. What is most likely happening is that the contractors are not producing within the cost parameters. Boeing probably strong-armed the costs down and the suppliers had to do something to stay afloat. Boeing does not like the quality it is receiving otherwise it would not crave more control.

What will probably not see the light of day is what the increased control will cost Boeing in terms of margins. The advance that was forgiven looks like a loan loss when it really should have been an increase in materials and direct cost inputs.
How much more needs to be brought under control; purchased? Boeing probably is not entirely certain.