Is Boeing's Dreamliner Production Ramp-up a Pipe Dream?

Is Boeing's Dreamliner Production Ramp-up a Pipe Dream?

Boeing says it's on track to produce 10 Dreamliners per month by the end of 2013. But some industry observers remain skeptical.

Boeing Co. is holding fast to its assertion that it can ramp up Dreamliner production to 10 airplanes per month by the end of 2013.

Somehow.

In January, Boeing boosted 787 Dreamliner production from two airplanes per month to two and a half airplanes per month, Boeing's Randy Tinseth explained in a recent TV interview.

The company aims to lift production to three and a half Dreamliners per month in the second quarter of this year, Tinseth added.

By the end of 2013 -- if everything goes to plan -- Boeing will be churning out seven Dreamliners per month at its facility in Everett, Wash., and three Dreamliners per month at its new assembly plant in North Charleston, S.C., Tinseth told CNBC's "Squawk Box" Asia in February.

The Dreamliner's history of supply chain troubles is a big reason why some industry observers question Boeings ramp-up plans for the 787. (Photo courtesy Boeing Co.)

Noting that Boeing also is ramping up production of the 737 and 777, Tinseth said that if the company reaches all of its targets, it will have achieved a 40% overall production-rate increase between the beginning of 2011 and the end of 2013.

"And frankly right now we have a lot of airplanes to build, and that's our focus," said Tinseth, who is vice president, marketing, for Boeing Commercial Airplanes.

"I you want a Dreamliner today, we're talking at the end of the decade [before Boeing can deliver it.] But with that backlog, with this broad customer base, I think we're in a very good position."

The optimist might point to the Boeing 737 as proof that a dramatic production ramp-up is possible. In the case of the Next-Generation 737, Boeing leveraged lean manufacturing strategies at its Renton, Wash., factory to boost output from 28 airplanes per month to the current record rate of 35 per month.

But experts contend that the Dreamliner is a different animal.

Boeing has boasted that the liberal use of composite materials is a big reason why the Dreamliner "is bringing unprecedented levels of fuel economy, maintenance-cost improvements and environmental sensitivity to the marketplace."

From a manufacturing standpoint, though, that's a big concern to John-Paul Clarke at the Georgia Institute of Technology.

"[With composites], they've introduced a lot of new ways of manufacturing, some of which are very readily scalable and some of which are on the edge of scalability," says Clarke, who is an associate professor in the School of Aerospace Engineering at Georgia Tech and director of the school's Air Transportation Laboratory.

"My worry with the 787 is whether or not some of these manufacturing processes are truly as scalable as people believe they are."

He points to Boeing's recent issues with delamination on the Dreamliner fuselage -- which the aircraft maker attributed to improper shimming during the manufacturing process -- as an example.

"We've been building aircraft out of aluminum for years and years now, so we have that process down cold," Clarke says. "But a lot of these processes [associated with composites] we don't have down cold, and that's natural, because they are new manufacturing processes."

'Where Do You Get the Labor?'

The other big challenge Boeing faces as it tries to ramp up Dreamliner output, Clarke asserts, is manufacturing capacity in the supply chain -- "both physical capacity in terms of manufacturing facilities, and intellectual capacity in terms of skilled craftsmen to actually build the stuff."

That's a double whammy for smaller aerospace suppliers, many of whom consolidated manufacturing operations and cut their workforce ranks to the bone just to survive the recession.

For suppliers that need to expand their manufacturing space to meet the uptick in aircraft production, financing remains tight, says aviation-industry consultant Scott Hamilton.

"The banks are still not lending the way they used to," says Hamilton, who is managing director of Leeham Co. LLC, an Issaquah, Wash.-based commercial-aviation consulting and research firm.

And even if a supplier has the means to bump up capacity, Hamilton adds, there's still the question of "where do you get the labor?"

Like many other manufacturing sectors, the aerospace industry is grappling with a shortage of skilled workers. Compounding the problem is the prevalence of composite materials on the Dreamliner -- and the lack of vocational training on composite technology in the United States.

"There's just a real shortage of education. There's a real shortage of skilled labor. There's a shortage of financing," Hamilton says. "It's a real tough challenge."

During Tinseth's recent appearance on "Squawk Box," the show's hosts asked Tinseth how the company plans to more than triple production of the Dreamliner by the end of 2013, given the potential capacity constraints as well as the manufacturing challenges that the 787 already has endured.

Tinseth responded: "We have a plan."

"We're sticking to that plan," said Tinseth, who was in Asia for the Singapore Airshow. "We're making sure we're going through this in a slow and consistent manner."

It seems as if few outside Boeing are buying in.

"There isn't a Wall Street analyst who I talk to who believes that Boeing is going to be able to achieve that rate," Hamilton says. "And it's all having to do with the supply chain and the industrial partners."

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