Boeing is clawing its way back to normal 737 production levels after facing delivery shortfalls in Q3, this time due to supplier quality issues from Spirit AeroSystems.
The aerospace manufacturer remains focused on reworking the quality issue in the aft pressure bulkhead on some 737 units, but not without help from its supplier, President and CEO Dave Calhoun told analysts during an Oct. 25 earnings call.
“We are seeing increased stability and quality performance within our own factories, but we’re working to get the supply chain caught up to the same standards,” the CEO said. “Our production system is poised for steady and efficient increases, but we won’t push the system too fast and will ensure the supply base is in lockstep with us.”
In Q2, Boeing announced plans to increase annual production of its 737 aircraft to 38 planes per month as the company looked to stabilize its supply chain and production levels after facing operational disruptions.
However, reworks on the aft pressure bulkhead slowed production and deliveries down in Q3 to 70 737s, Calhoun said. Boeing now expects to deliver between 375 and 400 737 units this year. Quality issue costs are also “exponentially higher” on those finished aircraft, the CEO added.
Boeing identified additional areas of the aft pressure bulkhead in need of attention since the issues came to light in September. That has increased the units the manufacturer has to rework and means more time to stabilize production and deliveries, Calhoun noted. But the CEO expressed confidence about progressing through the fixes and ramping up its pace. “We are keeping our suppliers hot, according to the master schedule.”
Boeing plans to complete the production transition to 38 per month by the end of 2023, and still anticipates 50 monthly deliveries by 2025 and 2026, the CEO added. In the meantime, Boeing remains focused on liquidating its 737 inventory.
Boeing has been working to get its operations up to standards, and is pursuing various operational changes and investments to optimize productivity, including investing in new training programs to streamline performance on the factory floor, as well as deploy resources to its suppliers to help aid in production recovery.
Spirit AeroSystems scrambles to restructure operations
Boeing and supplier Spirit AeroSystems, which has also had its fair share of issues this year, have been working together very closely over the past year in a bid to recover its production levels after the supplier notified them of a quality issue on some 737 aircraft.
The supplier recently brought in Pat Shanahan, who is acting as interim CEO, to help with operational changes as they look to get their production levels back on track.
Boeing CEO Calhoun noted in the earnings call that it reached an agreement with supplier Spirit AeroSystems on the commercial terms associated with the 737 and 787 programs to help get production levels to 38 monthly unit deliveries.
"And maybe even more importantly, I think the selection of Pat at exactly this moment in time to sort of get them really focused on factory performance I’m quite optimistic and quite pleased with,” Calhoun told analysts. “We’ve had just in the last 30 days as many interactions with Pat as we’ve had over the last year, even though we’ve had more than 100 people embedded at Spirit.”
Overall deliveries for the quarter, specifically on the 737 program, were impacted by the aft pressure bulkhead issue and continued supply chain and labor challenges, SVP and CFO Mark Suchinski told analysts during a Q3 earnings call. The supplier now expects full year deliveries on the 737 program to be roughly 345 units to 360 units.
“The two biggest levers for us are the supply chain and our own internal productivity,” Shanahan said in the call. Roughly 25,000 parts go into a 737 fuselage. To make 42 units, roughly one million parts are needed, he added. Paired with fasteners, that makes it roughly 10 million parts per month.
The interim CEO further noted that Spirit AeroSystems is “not doing things parametrically,” but instead is looking at things by the day..
“And so for us to produce, it’s really about being synchronized and stable,” Shanahan said. “And there’s just a lot of detail that goes into achieving that. I believe that we’ll be able to stabilize here and meet Boeing’s demands in 2024.”
“The commercial agreement gives [Spirit AeroSystems] the resources and the breathing room they need to get ahead of our rate forecast,” Calhoun said. The CEO further noted that the company feels like it took a step forward on relieving that constraint.
“I got to tell you, these fuselages, man, they have been gone over with a microscope in light of what we’ve experienced here in the last four months,” he added.
