Ramon Lopez/WASHINGTON DC
Boeing has toned down its optimism over the future of the MD-11 and warns that more problems with Next Generation 737 manufacturing might produce additional delivery delays, making a third consecutive quarterly charge a possibility. There are signs that more lay-offs could follow.
Production problems left Boeing in 1997 with its first annual loss in 50 years. Although the company recorded sales of $46 billion, a $1.6 billion pre-tax charge in the third quarter and a $1.4 billion pre-tax charge against fourth quarter earnings yielded an overall $178 million net loss for the year.
Outlining the latest position on the company's commercial aircraft production recovery efforts, Ron Woodard, president of the Commercial Airplane Group, says that gains have been made, but "-we are not out of the woods yet. Recovery plans are inherently challenging. There is still a risk that the challenges to our production system - particularly on the Next-Generation 737 - could result in additional delivery delays."
Boeing executives have cooled their appraisal of the long term prospect for the MD-11. Phil Condit, Boeing's chairman and chief executive, says: "The future of the MD-11 programme depends on the success of current marketing efforts, and the company expects to have a clearer picture of the programme's future later this year."
In comparison, Woodard insisted late last year that the MD-11 programme "could have a very long successful production run". A Boeing forecast predicted a market for 300 additional MD-11s over the next two decades, around 80% of them freighters.
Terminating MD-11 production would lead to more lay-offs at the Douglas Products division in Long Beach and at the company's wing plant in Ontario. About 3,000 jobs are associated with the MD-11.
Meanwhile, production of the latest model 737s has been slowed by parts shortages and "unexpected modification requirements" from the US Federal Aviation Administration and Europe's Joint Aviation Authorities. Work to modify aircraft already completed or in advanced production, which includes the retrofit of new overwing exits, is requiring some 4,000 man hours per aircraft, says Woodard. Boeing nevertheless intends to accelerate Next Generation 737 production from seven to 14 aircraft a month during the second quarter of this year.
On 20 March, plans to lay off 6,200 workers in California and 800 in Canada were announced as a result of restructuring.
Europe's four largest aerospace and defence companies have agreed in principle to merging all their assets to form a single, unified aerospace and defence company and have set down guidelines for the merger in a report to the French, German, Spanish and UK governments.
The four Airbus partners, Aerospatiale, British Aerospace, CASA and Daimler-Benz Aerospace (Dasa), announced on 27 March that they had submitted a joint report on the restructuring of the European aerospace and defence industry to the respective governments, in response to a French-German-UK joint statement to industry in late 1997 requesting "a clear plan and detailed timetable" for reorganisation. The report has also been forwarded to the Spanish Govern- ment as it reflects work by the Airbus partners on the transformation of Airbus Industrie into a Single Corporate Entity.
The report, which is confidential, is believed to express agreement by the four companies to incorporate all of their assets into one company with a single unified management with a run-for-profit and shareholder interest-based operating philosophy. Broad agreement has also been reached on a consolidated company, referred to as the European Aerospace and Defence Company (EADC). However, the report is understood to also highlight disagreement with Aerospatiale over shareholder rights simply because of the incompatibility of combining a large, and dominant, Government-controlled shareholding within a broad European company with a distributed and largely private shareholder base.
The French Government this week rejected Aerospatiale's privatisation as a precondition for the restructuring. Feasibility studies of the possible merger, although no timetable has been set. Other companies, namely Finmeccanica, Saab, Dassault Aviation and Lagardère/ Matra will be considered as part of the consolidation.
Source: Flight International
