“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Saturday, December 08, 2007

Boeing 787 Dreamliner, Is the Dream a Nightmare?

The least amount of necessary parts involved with a working machine, the better. Simply stated, there are less things to go wrong. In planning the 787 Dreamliner, Boeing has built a manufacturing model dependent upon an intricate supply chain of sub-contractors and vendors. That means instead of one accounting and finance division, the Dreamliner is dependent upon the financial divisions of every vendor. Those vendors are supplied by other vendors and all, starting with Boeing, will naturally attempt to shift the financial burden up and down the line. Finance rules in manufacturing. At an optimum, everyone shares in the profits. The down side is a sharing in losses.

Boeing, late for its first deliveries, has been saying it has a nuts and bolts (fastening problem), caused by late vendors. Sounds more like the old cash flow problem to me. It only makes sense that vendors and sub-contractors only make money when a project flows on time. Start a delay chain with multiple parties and you have a growing multitude of problems.

Perhaps it would have been better to call it a Dreamliner after it achieved dream status.

Behind Boeing's 787 delays
Problems at one of the smallest suppliers in Dreamliner program causing ripple effect

By David Greising and Julie Johnsson | Tribune staff reporters
December 8, 2007

When Boeing Co. announced a costly, six-month delay in the first delivery of the world's fastest-selling airplane, the 787 Dreamliner, it singled out a shortage of bolts and screws as the chief cause of trouble.

But the Tribune has learned that the problems go deeper and are more difficult to solve. Boeing's 787 meltdown also stems from trouble with the daring global manufacturing network it put in place to make the plane, flying in sections of the plane from companies in Japan, Italy, South Carolina and Kansas and "snapping" them together in only three days' time, an audacious idea that promised to revolutionize the way airplanes are built.

Yet the impact of a little-known Texas company that fell months behind building tools needed to assemble the plane highlights how a hiccup can play havoc with Boeing's tight 787 timetable.

The company, Advanced Integration Technology, has fallen short supplying Vought Aircraft Industries, itself the Dreamliner's most troubled supplier. Dallas-based Vought has struggled to fabricate its fuselage sections to Boeing's standards, according to several Boeing suppliers contacted by the Tribune.

Because AIT plays a key role in connecting virtually the entire length of the 787's fuselage, the company's troubles are having a ripple effect, the suppliers say.

The delay of the 787, which has not yet flown, is costing Boeing and its suppliers billions of dollars in penalty payments and cash shortages and raising questions about whether Boeing can meet its revised delivery schedule.

Three major suppliers face a total cash shortfall of $1.2 billion next year because their payments from Boeing have been delayed along with the initial 787 deliveries, according to a Tribune analysis of financial disclosures.

At least five of Boeing's largest partners say they have demanded to renegotiate their payment terms. Boeing itself expects to take a cash hit of $2.5 billion in 2008 from paying penalties to antsy airline customers and keeping its suppliers afloat.

The trouble with the bolts and screws, known as fasteners, with AIT and with previously disclosed software snafus point up the daunting challenge, and the scant margin for error, Boeing took on with the 787.

The production problems appear so complex that suppliers and analysts think it is unlikely that Boeing can meet its plan to produce 40 of the new aircraft by the end of next year and 109 total planes by the close of 2009.

Even so, the company on Tuesday is expected to reassure analysts and reporters in a worldwide conference call that it is mending the 787's broken supply chain.

"We're doing what we need to support our partners at this crucial time, but we're not going to get into specific details," a Boeing spokeswoman said in an e-mail Friday.

A critical juncture

The troubles are a jarring turn for an airplane that stirred excitement, and sales topping $100 billion, after Boeing launched the 787 Dreamliner program in 2004.

The Chicago-based aerospace giant is at a critical juncture, observers say. Boeing's airline customers have built their strategies around on-time deliveries of the new airplane.

Suppliers are facing cash-flow and logistical problems coping with endless tweaks in design and production, while for the first time bearing the cost of those changes, thanks to Boeing's new outsourcing strategy.

The cost of delays has Boeing's suppliers worried about "unk-unks," aerospace jargon for "unknown unknowns." They fret that the supply-chain problems will continue, that unexpected problems will arise during flight tests, and that Boeing's schedule will slip beyond the initial six-month delay.

Any further setbacks could unsettle confidence in Boeing's timetable and create a competitive opening for Airbus SAS, Boeing's European archrival.

Ultimately, Boeing's effort to grapple with the troubles could determine whether its broad vision for a global supply chain can work. Already bearing roughly half the 787's $10 billion development cost, suppliers might balk on Boeing's next program if delays mount and red ink flows.

"It's proven a good business model for Boeing in the short term," said David Pritchard, aviation researcher at the University of Buffalo. But, he said, "If these risk-sharing partners took a financial hit on the 787, are they going to be willing to play the risk-sharing game again?" the rest of the tale


  1. Supply problems will shake out, Boeing will discard unreliable vendors and contract with new ones with a better record. But Airbus can't wish away their strong Euro, and that's going to kill them when airlines go plane shopping.

  2. Not quite ... Airbus prices in dollars. They still get to sell, but their profits go to shite of course.

    "... flying in sections of the plane from companies in Japan, Italy, South Carolina and Kansas and "snapping" them together in only three days' time, an audacious idea that promised to revolutionize the way airplanes are built."

    "Audacious" ideas on $10 000 000 000 projects. Brave, gambling so on globalization. At a guess, just like Airbus they are betting on government bailout if the fit hits the shan.

  3. This type of dispersed manufacturing must be a security nightmare.

  4. Our small airplane industry has been on the skids for years. One reason--law suits.

  5. bobal: Our small airplane industry has been on the skids for years. One reason--law suits.

    Another reason: The Senator who was supposed to steer military contracts your way prefers to spend all his time in the airport bathroom tapping out Broadway show tunes.

  6. As to the enemy combatants status under the Geneva Conventions

    Detainees' treatment is an issue that has come before the Supreme Court. In October 2005, the court heard a case involving the legal rights of detainees held at the Navy's base at Guantanamo Bay, Cuba. It decided in June 2006 that al-Qaida prisoners are protected by the Geneva Convention's prohibitions on torture and cruel treatment.

    That was the Hamdan case, which granted Geneva Convention protections to enemy combatants under Article 5 of the Conventions dismissing Administration arguements that the enemy combatants were not covered under Article 4 of the Conventions.

    The Court found that:
    "... Because the military commission does not meet the requirements of the Uniform Code of Military Justice or of the Geneva Convention, it violates the laws of war and therefore cannot be used ..."

    The fact that the terrorists were not signatory to the Conventions not even an issue, under US law.

  7. The enemy either are criminals, to tried under the UCMJ or they are Prisoners of War, not to be tried at all.

    But they cannot be both.

  8. The destruction of evidence violates the UCMJ, I pretty sure of that.

  9. We have been over Hamdan time and again. It was a narrowly split decision with the majority twisting the Convention to uphold their viewpoint. The Court is not infallible. They were wrong before Hamdan and they were wrong with Hamdan.

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