Boeing to halt 737 and 747 output for 3 weeks Swamped by orders, it has shortages of parts and labor

Aerospace

October 04, 1997|By BLOOMBERG NEWS

SEATTLE -- Boeing Co., showing how badly it was caught off guard by the global boom in aircraft orders, said yesterday that it will halt production of its 747 and 737 jetliners for about three weeks to catch up with crippling labor and parts shortages.

The moves mean that the world's largest airplane maker will deliver about 335 jets this year, down from the 350 earlier estimated, and that fourth-quarter earnings will be lower than expected.

Boeing's drastic measures indicate that its production problems are far more severe than executives had let on, analysts said. It may take Boeing much longer than expected to get costs under control as it pushes production to record levels to fill the hundreds of orders it's gotten from the world's airlines.

"They have been soft-pedaling what their problems are, and they are more severe than we anticipated," said Paul Nisbet, an analyst at JSA Research in Newport, R.I.

Boeing shares fell 50 cents to $51.875 in heavy trading on the New York Stock Exchange, where it was the most most active issue in consolidated trading.

Boeing's biggest problems have been in making its largest jetliner, the 747. The 747 production line, in Everett, Wash., has been behind schedule for much of this year, forcing Boeing to take workers from other lines to try to catch up.

The 747 line will be halted for 20 days, meaning that planes won't advance down the line and out the door for delivery during that period.

Instead, workers will concentrate on doing work that had been delayed because of lack of parts or labor. The 747s had been moving down the line with work left undone in the hope that it could be completed later without stopping the production line.

Boeing will take similar steps in Renton, Wash., where it builds the smaller 737 jetliner. Work on 737s already in production will be completed as parts become available, though no planes will leave the factory for 25 days. Boeing has orders for more than 800 737s.

Parts shortages are the biggest problem in Renton, where Boeing is running out of everything from aluminum to the fasteners used to attach parts to airplane fuselages.

At the Everett 747 plant, the problem is finding enough workers, Boeing has said. The company has hired about 15,000 employees this year, after adding 21,000 last year. It picked up 64,000 workers when it bought McDonnell Douglas Corp. for $16.3 billion last summer and is trying to use some of them to solve its problems.

Boeing is trying to boost production to a record 43 airplanes a month by mid-1998 from just 18 a month a year and a half ago, in what has been the fastest production increase in its history. Boeing is making 40 planes a month today.

Delayed deliveries can severely disrupt operations at airlines, which often schedule airplanes for service shortly after they arrive from the manufacturer.

Boeing may have to pay penalties for the missed delivery dates, as well.

"We're working very closely with our customers, and realize that any delays in delivery are very serious and impact their bottom line," said Ron Woodard, president of Boeing's Commercial Airplane Group.

Though customers are likely to be angry, they probably won't cancel orders with Boeing and switch to rival Airbus Industrie, analysts said.

Pub Date: 10/04/97

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