Dive Brief:
- Aerospace and defense giant General Dynamics saw supply chain improvements in its aerospace division last quarter as suppliers became more predictable and compliant with catch-up schedules, according to a July 26 earnings call.
- Although there is still a significant backlog of late parts, “processes are in place to catch up, deliveries are trending positive and we have greater transparency,” CEO Phebe Novakovic told analysts.
- While General Dynamics anticipates more catch-up in Q4 as transparency and reliability improves, third quarter deliveries will still be impacted, Novakovic said.
Dive Insight:
Despite greater supplier predictability, General Dynamics saw another quarter of fewer deliveries than anticipated as supply chain issues lingered, Novakovic told analysts. In Q2, the manufacturer delivered 24 Gulfstream aircraft, up almost 9% year over year, according to an earnings report.
“We now expect to deliver 27 aircraft in the third quarter, with a rapid increase in the fourth quarter deliveries,” Novakovic said. “In short, we are making good progress under difficult circumstances. However, we expect to deliver five to six fewer aircraft than the 145 we forecast at the beginning of the year.”
The CEO noted that the shortage of parts continues to “cause significant out-of-station work,” which is impacting efficiency. Regardless, General Dynamics anticipates the improvement to help relieve this issue as the company moves through the second half of the year.
“Remember, too, our new planes are all built in purpose-built facilities. We’ve expanded our wing line. In short, we’ve [facilitated] for increased production, and finally, the fact that we have planes — and you can see this from the increase in inventory that are awaiting parts — we now have a schedule, and all of that taken together will give us the ability to deliver,” Novakovic said.
The aerospace industry has faced its fair share of turbulence over the past year. Earlier this year, General Dynamics blamed supplier Honeywell after late shipments spurred missed aircraft deliveries. Boeing has been making efforts to recover 737 production after reporting quality issues on the fuselage of some 737 aircraft. Meanwhile, aerospace supplier Pratt & Whitney is recalling and inspecting a significant portion of one of its engine lines.
