Acquiring Vought in South Carolina

We’ve been getting a lot of inquiries today - understandably - about our announcement this morning that Boeing is going to acquire the Vought operations in South Carolina. This is the facility where fabrication and assembly of structures, as well as systems installation, takes place for the aft fuselage sections of the 787 Dreamliner.

This acquisition will strengthen the 787 program. We’ll be integrating Vought’s talented employees into Boeing, and we’ll be able to accelerate our productivity and efficiency improvements throughout the 787 supply chain as we move toward production ramp-up.

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Boeing has agreed to acquire the business and operations conducted by Vought Aircraft Industries in South Carolina.

One of the questions we’re getting asked around this announcement is: Does this move mean we’re changing our thinking about the global strategy for building the 787 Dreamliner? The answer is no. We remain committed to our business model. This approach has resulted in the introduction of a jetliner that has sold more at this stage than any other airplane in history.

We’ve acknowledged some lessons learned in getting the program up and running, and yes, we’re re-drawing some lines and adjusting where necessary. It’s part of a process of bringing the most value to our customers, our shareholders and our employees.

The other big question we’re hearing is: Does this mean Boeing is going to locate a second 787 assembly line at this plant? The answer is that our main priorities on the program right now are to work through the issues regarding the recently announced postponement and to implement the flight test program. After that, we will address the move toward production ramp up. Contrary to speculation, no decisions have been made about a second line.

Comments (7)

Norman (Long Beach, California, United States):

I think it was a very necessary and common sense decision to save Vought as they build components for Boeing aircraft, the merger not just saves jobs but it keeps the 787 line on progress.

James Robinson (Long Beach California):

My understanding of the state of the 787 program is based on open source material and a little bit of hearsay.

My understanding of the situation is the business model Boeing attempted to use in the 787 was not flawed. The initial implementation of the 787 program and its business model up through a few months after roll out was flawed in ways which defy common sense.

The idea of outsourcing large portions of the development and construction of a new airplane in order to avoid having to purchase the capital equipment necessary to work with a new material (Autoclaves) is not necessarily a bad idea. A company can avoid the up front capital expenditures that way and in Boeing's case, get away from having to deal with the Unions. The downside to this strategy is Boeing has to help get thier suppliers up and running and ensure they are successful in developing the technology. In essence, Boeing has to make sure Kawasaki Heavy Industries can build a world class wing. In doing so, Boeing runs the risk having a KHI wing could be more important in the future than having a Boeing airplane.

However, Boeing badly managed the initial implementation of this strategy. The analogy I use it that of a general contractor building a house. A general contractor would not simply sub out all the work and assume the house would be built on time and on budget. The general contractor would keep tabs on the progress of the sub contractors and make sure it fell in line with the master schedule of the project (building the house).

In my opinion Boeing is purchasing the facility from Vought because the contract with Vought did not properly spell out penalties and rewards for meeting program milestones in order to achieve the program goals. For this reason, Boeing is forced to purchase this facility in order to achieve program goals. Again, it is not the strategy which failed, but the implementation of that strategy.

Boeing will know in 20 years whether or not the strategy has failed or succeeded by looking at the competitive nature of the commercial airplane market. If it becomes more important to have a KHI wing, or a Spirit Aerosystems fuselage section than it is to have a Boeing Airplane then Boeing will have failed.

Ed Martinez (VCV,CA 92394):

Unfortunately, most operational leadership today believe that the accounts “as all knowing”.
The real reason that any manufacture company that produces a complicated product or machinery is fundamentally down to two things. The local talent of the people can make the product and the type regulations of the area.

As usual, I predict more floundering and mismanagement. Why? The engineering corp. and technical talent is not there. There are several areas in the country that the Boeing team could have picked. Secondly, the area was probably chosen because it was easy on environmental and labor regulations.

Thanks for wasting my Boeing stocks on this boondoggle

Barun Majumdar (Seattle, WA, USA):

We should never tend to forget at this trying time even that innovation is the key to success for this pioneering 787 program. We should make sure that the best technology goes into it. You've rightly pointed out our priorities are to work through the issues regarding the recently announced postponement and to implement the flight test program.

Jim F. (Renton, WA):

I doubt it was Randy's intention, but based on his comments regarding a second 787 assembly line, most will assume Boeing is at least considering this option, as a means to meet a very steep 787 production ramp up. As a result, rumors about locating that second assembly line in South Carolina will likely continue.

Paulo M (Johannesburg, RSA):

This move by Boeing to take control of Vought's facilities - or share of the 787 program - in South Carolina is, quite frankly, unsurprising.

I have to agree with what James Robinson said here - the problem at the root of this is exclusively the management of the program - and that includes managers on the 787 itself, as well as Boeing Company officials. Many of the suppliers on the 787 have had tremendous success with previous Boeing programs - the 767 and the 777. I think you could single all of the Japanese partners on the 787 as some that have performed exceptionally well on the 787 - as they have on the 767 and 777.

Unfortunately, Boeing placed too much faith on its partners - and failed to adequately watch what they where doing. Those that had the experience of working with Boeing before did fine - or exceptionally well (the Japanese), while those that didn't have since had their names tarnished in this industry's leading publications. And that's Boeing's fault.

But, this episode demonstrates how few companies can actually match the standard required to build a modern Boeing - or Airbus - airliner. It's a tough world out there..

hamilcar (Philippines):

Sounds like Boeing is thinking about building future 737 and 777 (composites) in S.C.

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