BOEING's decison to purchase Vought facility - A breather to Dreamliner project

Boeing’s announcement to acquire the business and operations conducted by Vought Aircraft Industries at its South Carolina facility, where Vought builds a key structure for Boeing's 787 Dreamliner airplane is one of the key factors in re-assuring the 787 customers, who has been extremely worried on the Composite structure of 787 and its failures in recent past. The transaction is expected to close by the third quarter of 2009. Vought had already been struggling financially while the industry had been thriving and the economic downturn only served to stifle that rebound.

Accelerating productivity and efficiency within 787 supply chain -- Bolsters Boeing capability to develop and produce large composite structures -- Vought continues relationship with Boeing on range of programs. The Vought facility, located in North Charleston, performs fabrication and assembly of structures and systems installation of 787 aft fuselage sections, which are made primarily of composite materials. After the transaction, Vought will continue its work on many Boeing programs, including other components of the 787, as well as structures and components on the 737, 747, 767, 777, C-17 and V-22 through operations located elsewhere. The successful execution of Boeing Commercial Airplanes and Integrated Defense Systems backlog; the effects of customers cancelling, modifying and/or rescheduling contractual orders; the timing and effects of any decisions to increase or decrease the rate of commercial airplane production; the timing and effects of decisions to complete or launch a Commercial Airplanes program at Boeing, would have the booster with the Vought facility and the highly trained manpower at the facility.

Boeing's ability to successfully develop and timely produce the 787 and 747-8 aircraft; the ability of suppliers and, as applicable, subcontractors to successfully and timely perform their obligations; the effect of political and legal processes; changing defense priorities; and associated budget reductions by U.S. and international government customers affecting defense programs; relationship with union-represented workforce and the negotiation of collective bargaining agreements; the continuation of long-term trends in passenger and cargo traffic and revenue yields in the airline industry; the impact of volatile fuel prices and the airline industry's response; the effect of declines in aircraft valuation; the impact of airline bankruptcies. Through the agreement, Boeing will acquire the North Charleston facility, its assets and inventory and will assume operation of the site, and the parties will resolve all matters related to Vought's prior work on the 787 program. The cash consideration to be paid to Vought at closing is approximately $580 million. In addition, Boeing will release Vought from its obligations to repay amounts previously advanced by Boeing. Separately, Boeing entered into new agreements with Vought for work packages on the 737, 777 and 787.

Vought Aircraft Industries has found itself at a convergence zone of declining production output by airframers that is likely to cause significant financial pain to the company in 2010. Cuts in production on Boeing products like the 777, the Gulfstream G450 and G550 business jets, Airbus A330/A340 reduced output, slowing ramp ups on 767 and 747-8, an uncertain budget on the C-17, and Cessna's decision to suspend the Cessna Citation Columbus program are sources of worry for Vought.
Today if Boeing were to place a second 787 line in Charleston, the facility would be the manifestation of the once mused-about 'supersite' that former 787 program manager Mike Bair discussed in November 2007 as a potential solution for the company's supply chain woes. The supersite would manufacturer and integrate not only the individual aircraft structures, but deliver them to an on-site final assembly line that would see the aircraft completed and delivered to customers. A Charleston assembly line would immediately benefit from a significant reduction in required flights by the Dreamlifter to move both structure and tooling between partner sites and final assembly operations in Everett, WA. Currently, the center and aft fuselage sections are flown to Everett from Charleston. In addition, the Italian Alenia-built horizontal stabilizer is delivered by way of the South Carolina site where the Dreamlifter refuels before continuing on to Everett. However, Boeing has found significant challenges in Charleston as it has worked to begin production on 787 facing workmanship and experience issues at a greenfield site that has little historical aerospace manufacturing experience. By contrast, Boeing's Everett and Renton, Washington final assembly facilities have almost a combined century of aerospace manufacturing experience.

In the wake of the nearly two years of delayed incurred by the 787 program as a result of the challenging logistical requirements, Boeing began 2009 examining how to rebalance its supply chain to apply its lessons learnt and push ahead with further development and production without similar disruption. Boeing had already moved significant 787-9 engineering work back in house for the development of the first Dreamliner variant.