Mar-04-2007 Boeing moves closer to ending C-17 production(topic overview)CONTENTS:
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ST. LOUIS Chicago-based Boeing says it will cease production of any C-17 military cargo jets that aren't under contract, or under firm commitments, by the Pentagon or foreign buyers. The company says -- without further aircraft orders -- it expects to begin reducing the size of its work force as early as 2008. [1] ST. LOUIS, March 2 /PRNewswire-FirstCall/ -- Due to the lack of U.S. government and new international orders for the C-17 military cargo aircraft, The Boeing Company is stopping procurement of parts for any new C-17s not under contract or firmly committed. This move is the first step in an orderly shut down of the production supply chain, should no further orders be received from the U.S. government or international customers.[2] According to Dave Bowman, vice president and C-17 program manager, Boeing had hoped to keep the production line operating while the federal government decided on the future of the C-17 program, particularly due to recent concerns over the aging C-5A fleet. Currently, Boeing is on contract for 190 U.S. Air Force C-17s, and independent analysis indicates a requirement for at least 222 of these aircraft.[3] Boeing needs 12 new plane orders a year to keep the C-17 production line running, according to aerospace analyst Richard Aboulafia of Teal Group in Virginia. The Air Force did not request new planes under its proposed fiscal 2008 budget but asked Congress last month for additional money outside of its proposed budget for two new planes, plus 280 million to shut down Boeing's production line.[4] In 2006, Boeing accepted significant risk and used company resources to fund the supply base and production line for 22 aircraft until mid-August. At that time, there was substantial international customer interest and the Air Force had designated additional C-17s as the number one priority on its FY2007 Unfunded Priorities List.[3] Without further aircraft orders, significant workforce reductions will begin in early 2008 as the production line heads toward complete shutdown in mid-2009." They currently have orders to deliver and support 190 C-17s for the U.S. Air Force.[5] The Chicago-based company said it is stopping procurement of parts for any new C-17s not under contract or firmly committed. The company said layoffs of 7,000 workers on its C-17 line will begin next year if the government doesn't start ordering more planes. Boeing is on contract with the Air Force for 190 planes but claimed that an unnamed "independent analysis shows a requirement for at least 222 of these aircraft."[6] Boeing informed its key C-17 transport suppliers that it will no longer order parts for the aircraft because of a lack of firm commitment from the U.S. Air Force for future orders.[7] Boeing made a similar announcement last year before receiving a U.S. military commitment for 10 new planes in the current Pentagon budget. The company said it is carrying more financial risk this year and would require funding for up to 16 planes in the next federal budget to keep the C-17 production line running through mid-2010 at its current rate of 15 planes per year, the most cost-efficient schedule.[8] Boeing said because of a 34-month lead time in building the military cargo jet, the company needed a commitment to avoid a break in production. "This action is reversible, but as the gap gets larger in the production line, it becomes more expensive," said Dave Bowman, the C-17 program's manager.[9] The company plans to embark on significant work force reductions in early 2008 and may complete the shutdown of production facilities in Long Beach, Calif., and St. Louis by mid-2009 if there is no new business. "Without or international customer commitments, we're compelled to take this regrettable but necessary action," Dave Bowman, Boeing's C-17 program manager, said.[10] The decision was made because of a lack of new orders for the aircraft from the U.S. military and international customers, said Dave Bowman, Boeing's C-17 program manager. Earlier this year the Harper government signed a contract with Boeing for the purchase of four C-17s. That project is estimated to cost around $1.8 billion. Another $1.6 billion will be spent on long-term maintenance and support for the aircraft.[11] The Defense Department did not request new funding for the plane in its budget for the fiscal year that begins October 1 and Boeing said interest from potential international customers is "significantly less than it was a year ago." "Without or international customer commitments, we're compelled to take this regrettable but necessary action," Dave Bowman, Boeing's C-17 program manager, said in a statement.[12] Maintaining the C-17 supply base and production line at current production rates will require funding for up to 16 C-17s when Congress finalizes the FY2008 budget, Boeing said in a release.[13] OTTAWA - Aerospace giant Boeing is stopping the purchase of new parts for its C-17 transport aircraft, the first step in potentially shutting down its production line for the plane, company officials announced Friday.[11] "Without further aircraft orders, significant workforce reductions will begin in early 2008 as the production line heads toward complete shutdown in mid-2009," said the company's statement. It said it has 7,000 employees directly involved in building the aircraft and that its supplier base has more than 25,000 people working on making parts for the plane.[14]  Boeing Macon's more than 500 employees received another jolt Friday afternoon as the St. Louis-based company announced the shutdown of production on any C-17 transport aircraft not under contract or firm commitment from the Pentagon or a foreign buyer. [15] Boeing says it needs a significant buy to carry the line; the efficient operating rate had been 15 aircraft per year. "As encouraging as these developments have been, however, in the continued absence of a DOD commitment o procure C-17s in the future, we must today announce our decision not to authorize the start of the next production lot of 15 aircraft," the letter to suppliers says.[7] In a repeat of last summer, Boeing said it had begun telling suppliers to stop producing parts for the C-17, the last of which would roll out of the Long Beach factory in mid-2009, unless further orders were placed for the four-engine jet. It takes about 34 months from the production of the first part to final assembly.[16] NEW YORK -- Boeing Friday took the first step towards shutting down production of the C-17 military jet, a move that could cost 7,000 jobs by 2009, due to lack of additional orders for the aircraft.[14] More than 7,000 jobs are at stake in California, Missouri, Georgia and Arizona, the company said. Boeing said again it was assessing the potential financial impact of ending C-17 production and may incur costs beyond those that would be recoverable from the U.S. government. Officials said they could not provide specific figures.[8] Boeing also said that interest in the C-17 among foreign militaries is significantly less than it was before. U.S. lawmakers, however, could come up with additional funding for C-17 purchases and the pressure will be on them considering the aircraft production is linked to the employment of more than 30,000 people in 42 states.[11] The aircraft has been the center of federal probes into improper relations between Boeing officials and military officials. Former Air Force acquisition chief Darleen Druyun went to prison for conducting improper employment talks with Boeing while she negotiated the C-17 contract adjustment.[14] We need more C-17s and I'm pushing for a way to do it." Sen. Saxby Chambliss, R-Ga., issued a news release late Friday expressing his strong support for the C-17. "I am disappointed with today's announcement," the senator is quoted in the release, "but I will continue to work to ensure that our military has the air mobility assets needed to conduct their missions." Bowman said he has not given up but called additional Air Force buys "much, much more risky" than last year.[15] The Air Force has upheld the fact that it wants to buy more C-17s but can't do so because of budget constraints. This is not the first time that threats to close on the production of C-17 have been brought up. Last year, lawmakers decided to allocate an additional $2 billion for the purchase of 10 more C-17s in its fiscal 2007 budget in addition to the 12 that had been at first requested by the Air Force.[10] If no new purchases are made, layoffs will come first at supply plants in St. Louis and Macon, Ga., then Long Beach, Bowman said, but an exact timeline was not revealed. Because the airplane requires a 34-month lead time for production, the company decided to notify suppliers this week following a Department of Defense decision excluding the C-17 in its fiscal year 2008 budget, released in early February.[17] The C-17 remains an operational workhorse. in the global war on terrorism, said Dave Bowman, C-17 program manager. We had hoped to keep the production line active and viable to protect this important national asset affordably.[18] Boeing made a similar announcement in August and said it planned to shut down the C-17 production line in mid-2009 without new orders.[12] As the first step in an orderly shut down of the production supply chain, The Boeing Co., on Friday announced that it is halting the procurement of parts for C-17 cargo planes.[19] If no further aircraft orders are received significant layoffs will begin early next year in the U.S. with a view of completely shut down the aircraft production line in 2009, Bowman said.[11] "The only impact it would have is on any additional aircraft your country would like to buy," said Bowman. "There's certainly an impact to that, or at least a risk with this decision." He said Boeing will continue to support the planes even if the assembly line shuts down in mid-2009. "We have support contracts, your contract there in Canada as well as our other customers, that go well beyond the 2009 time period," he explained. "We remain 100 per cent committed to those contacts.[11] Boeing has notified suppliers it will no longer buy parts for the four-engine jet not under contract or firmly committed, and will begin significant work force reductions in early 2008 if there is no new business.[12] The company says without further C-17 orders from the Pentagon or foreign buyers, it expects to begin reducing the size of its work force as early as 2008.[20] Al Stewart, a local Boeing spokesman, said the news was disappointing, but the Macon team had full confidence in the company's leadership and in the C-17 program. "We believe the C-17 is the right aircraft for the armed forces and we believe they need it," Stewart said.[15] With no new funding allotted for C-17s in the 2008 defense spending bills, Boeing announced that it has decided not to spend company money, building military cargo aircrafts that have no buyers.[19] The aerospace manufacturer said that due to a 34-month lead time in building the military cargo jet, the company needed a commitment to avoid a break in production.[21] "There will be a number of new C-17s needed, probably 40 or more." Terminating C-17 production is clearly inconsistent with America's and the world's need for airlift, he suggested. "It will also end the nation's industrial base capability to produce large military aircraft," Bowman said.[15] The closure of the C-17 production line could also affect 25,000 others who work for about 700 companies in 42 states providing parts and services for C-17s.[19] Boeing is getting some help from organized labor, as unionized workers lobby state and federal lawmakers to keep production of the C-17 going.[22] The plane has been in production since the early 1990s. Since Boeing began making the plane in 1995, the program has been one of Boeing's its largest, generating about $3 billion in annual sales.[16] The aircraft costs about $200 million and is designed to carry large equipment and troops to hard-to-reach airfields. It has been in service since the 1990s. It is one of Boeing's most significant projects, bringing in about $3 billion in annual revenue. The company has delivered 167 C-17s out of 209 orders, including those from Britain and Australia.[8] Boeing is assessing the potential financial impact of the U.S. government not ordering additional C-17s. The company may incur costs beyond those that would be recoverable from the government.[2] "I think customers within the U.S. government are starting to see some of that and think about potential C-17 replacements for older C-5As." The Boeing executive also said plans to increase Army and Marine troop strength along with their increasing mobility needs could add additional requirements.[15] Boeing Macon faced similar prospects last August until Congress approved legislation to purchase an additional 10 aircraft, raising the Air Force's programmed buy to 190. [15] The company reversed the first one issued to suppliers in August after getting funding for the additional Air Force planes and purchase agreements from international customers.[4] "We are disappointed that the UPL did not identify continuation of the C-17 line as a priority, particularly in light of the Air Force's stated interest in retirement of C-5As," said Bowman. "Without DOD or international customer commitments, we are compelled to take this regrettable but necessary action."[23] An unfunded requirements listing recently provided to Congress does request two C-17s, although the buy is not carried as a priority. Marshall said the Air Force's reluctance to add more C-17s is driven by what he called a "flawed" mobility capabilities study issued last year. "That's the problem here," he said.[15] Boeing said that is stopping procurement of parts for any new C-17s not under contract or firmly committed. [14] About 5,500 people work at the C-17 plant and an additional 25,000 for 700 companies in 42 states that supply parts for the aircraft.[16] In the absence of additional aircraft orders, Bowman said, significant layoffs would begin in St. Louis and Macon beginning the first and second quarter of 2008. [15] The company had considered building a commercial version of the freighter aircraft for the air cargo market.[14] Boeing will no longer buy parts for the four-engine jet and has already notified 700 suppliers for the same. [10]
REFERENCES 1. Boeing will stop work on C-17 aircraft not under contract by Pentagon 2. The Boeing Company :: Boeing Announces C-17 Line May End in mid-2009; Stops Procurement of Long-lead Parts 3. Boeing To Cease Production On C-17 Military Cargo Aircrafts - 3/2/2007 11:20:00 AM - Manufacturing.Net - CA6421095 4. Article - Money - Boeing again stops orders for C-17 parts, could end assembly in 2009 5. Boeing planning to close C-17 production 6. Boeing Wants More Orders 7. Aviation Week : Boeing Begins C-17 Line Shutdown 8. Boeing takes step to shut down C-17 production 9. Boeing warns of end for C-17 | Chicago Tribune 10. C-17 is again close to closing - The Money Times 11. Boeing may end production of C-17 transport 12. Boeing takes step to shut down C-17 production 13. Boeing's C-17 line may end in 2009 - Los Angeles Business from bizjournals: 14. Boeing'may cut up to 7,000 jobs by '09 due to C-17 shutdown - Mar. 2, 2007 15. Macon Telegraph | 03/03/2007 | Boeing Macon jobs again in jeopardy 16. cantonrep.com 17. Press-Telegram - Boeing again warns of C-17 shutdown 18. Latest News | News | Hemscott 19. Daytrading, Eminis, Forex trading, Swing Trading TOP STORY - 503796 20. The end of Boeing's C-17 cargo jet? : News : HOI 19 Online 21. Boeing ceases ordering parts for military C-17s: Business & Technology: The Seattle Times 22. STLtoday - Business - Story 23. Boeing Announces C-17 Line May End in mid-2009; Stops Procurement of Long-lead Parts |
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