Boeing Employee Information Hotline at 1-800-899-6431

This site will look much better in a browser that supports web standards, but it is accessible to any browser or Internet device.

Merchandise | Corporate Governance | Employee/Retiree/Emergency Information | Ethics | Suppliers
1998 Speeches

Richard James


Boeing Europe

"Aircraft Manufacturing in the 21st Century: The Challenge Ahead"

Financial Times Conference


September 03, 1998

Thank you (Michael), and good morning ladies and gentlemen.

I'm delighted to take part in this... the 12th Annual Financial Times conference, to be with all of you, and to have the opportunity to share this platform with Adam Brown.

I also look forward to the discussion and your questions.

As most of you are aware, this has been a rather hectic year for Boeing. We've had some extraordinary moments on the "up side," some major disappointments on the "down side," and a few moments in between.

It has been anything but dull, and that's probably a bit understated.

Given the pace and intensity of the past year, there's been little time for reflection. I trust that's true not only from Boeing's point of view but also from most anyone's perspective.

That's part of the reason I'm grateful for this conference.

At least here, and now, we have the opportunity to step back from the pressures and deadlines of our day-to-day working world and spend a few moments to look at our industry from the vantage point of a broader horizon - aircraft manufacturing for the 21st Century.

Ours is an industry that can look ahead with well-founded optimism. The opportunities before us are simply breathtaking.

Boeing forecasts that worldwide air travel will grow at nearly five percent a year for the next 20 years; air cargo traffic at more than six percent annually.

As a result, we expect the airline industry to add 17,650 new jetliners, worth $1.25 trillion to their fleets during that time - pretty serious money.

Here in Europe, airlines will need almost 5,000 airplanes, second only to North America. Interestingly, Asia's requirements are third, at 4,800 jetliners.

When you add up the numbers, it's no wonder Airbus and Boeing come to this conference in good humor and fine spirits.

But we are also realists.

The world's airlines are shopping for value as never before. Cost-based pricing is long gone. For some time now, value-based pricing is the name of the game - and it's going to stay that way.

Yes, the economics of air travel will continue to guide the development of new airplane design and production.

We also know what economic cycles can mean for our industry and our business, as we've seen most recently in the Asian market.

The road ahead will always present significant challenges. It already does. The competition will be fierce. It already is.

But based on experience - and at Boeing, that's 82 years of experience - we expect aircraft manufacturing in the 21st century to be nothing short of spectacular.

Indeed, I believe experience offers useful guideposts for the years ahead, and the challenges ahead.

Now, let me focus on this 82 years of experience.

First on my experience list is the importance of a long-term view.

Over a period of decades, air travel within and between different regions of the world has grown at a consistently faster rate than underlying regional and global economic growth. In addition, there is a need to replace aging aircraft.

So, while there always will be downturns in the economy and in the commercial airline ordering cycle... and while the aircraft manufacturing industry must be prepared for them... at no time can we afford to lose sight of the long term.

Indeed, without a long-term view it simply would not make sense for any manufacturer to launch a new airplane, or derivative. You don't build an airplane for one customer. You must wait for the market to justify the decision.

Second on my experience list is the breadth of our common interests.

Whether we are manufacturers or regulators; primes or suppliers, Boeing or Airbus; scheduled carriers or charter operators; and whether we live and work in Europe, Asia, Africa or the Americas, each of us share much in common.

All of us are working hard to make very safe airplanes even safer. We all want to find ways to increase passenger comfort.

We are all sensitive to the environment. We are all interested in making airplanes more efficient, more reliable, with better economic performance and greater operating efficiency.

It's also in everyone's best interests to have a sensible and uniform regulatory environment. And who among us isn't looking for better technology focused on solving real problems in ways that make good economic sense?

There's much we can do, and are doing, to move these frontiers forward. That work must continue.

Third on my list is the importance of strong, capable industrial teams.

It takes a lot to build commercial jetliners:

This work, to be done right, requires the collaboration of the best in class in our industry - and that, perhaps more than anything else, requires understanding and teamwork. When it's there, everyone benefits.

The record is certainly clear on this point - and to find the record, we can begin right here.

Boeing partnerships on the military side are just as striking:

On the space side of our business, the International Space Station is a 16-nation partnership with Boeing as prime contractor. The space station program has created 100,000 jobs worldwide.

There are 11 partners from ESA, the European Space Agency.

These examples from Boeing's side of the ledger are, of course, replicated elsewhere.

That's why I believe it is fundamentally important to remove every obstacle that prevents understanding and break down every wall and barrier that hinders a robust, capable and efficient supplier base.

It's good for all of us on both sides of the Atlantic - primes and subcontractors alike.

The result will be sharper competition and a more capable aircraft manufacturing industry that will be better able to give operators the jetliners they need to win in their marketplace.

Yes, there is much that brings this industry together.

Now, let me turn for a few moments to a somewhat narrower perspective, but also relevant to the future of aircraft manufacturing and the challenges of the 21st century.

The new Boeing company was formed thirteen months ago when Boeing, McDonnell Douglas, and Rockwell began operations as a single company.

It's been quite a ride.

Much public attention has been focused on the struggles of our commercial business.

In pushing to double production rates to meet the demands of a booming jetliner market, the company experienced serious cost and schedule problems.

Short-term financial performance suffered. Recovery plans are still underway - and they're on or ahead of schedule. Nonetheless, the public spotlight on our difficulties is understandable.

And, as we announced earlier this week, the ride isn't yet over.

The commercial side of the business has a new management team, led by Alan Mulally. Alan was formerly president of the company's information, space and defense group. Earlier, he headed the company's 777 program, has been introduced.

But there's been another part of that ride, one that's received far less public attention. It has much to do with aircraft manufacturing in the 21st century. And for the remainder of my remarks, it has my full attention - beginning with the breadth and balance of the new Boeing.

Before the merger, the commercial side of our business accounted for the bulk of revenues - about 75 percent. That's changed substantially. Today, the ratio is about 60 percent commercial, and 40 percent information, space and defense. Each segment has an amazing range of products. In a cyclical business like ours, breadth and balance is the right stuff.

Speaking of the right stuff, Boeing has developed and launched ten airplanes in the last five years, each one meeting a 21st century market need and each one focused on its economic viability: utilization, maintenance and airplane price.

Last year alone, we launched the 737-900 and the extended range 767-400. We rolled out the 737-800, the 777-300, and certified and delivered the first 737-700.

Since January this year, we rolled out the 717, the 757-300 and our new business jet. We rolled out and certified the 737-600. The 737-800 was certified and the first triple 777-300, which will be at Farnborough was certified and delivered. And there's still four months to go.

In June, we delivered 61 airplanes, the highest monthly total in nearly 30 years. And last month, Boeing delivered 13 different models of jetliners, which, by the way, is more than Airbus produces.

When you add it up, the Boeing product line is the best definition of breadth and balance that I know.

Today's complete family of Boeing commercial jetliners offers more choice than ever before - from 100-seat aircraft to nearly 600 seats with nearly a score of passenger and freighter models in between.

This family concept allows carriers to match capacity to demand, serve multiple markets efficiently, and reduce cost through crew and system commonality.

The concept brings unmistakable value to customers today, and it will bring unmistakable value to customers in the 21st century.

Breadth and balance is also at the core of our information, space and defense business. Balance is reflected in the fact that no one program accounts for more than 15 percent of this segment's revenue.

When it comes to breadth, it's difficult to figure out where to begin. The product line is that extensive, ranging:

From Boeing's point of view, the bottom line on breadth and balance is rather clear cut. Meeting the challenges of aircraft and aerospace manufacturing in the 21st century - whether commercial or military -- begins with the right product line.

Meeting the challenges successfully also requires the right infrastructure. And by the right infrastructure, I mean:

For Boeing, the drive for that kind of infrastructure has been another part of the ride for a long time. As you would imagine, since the merger 13 months ago, the ride has sure picked up speed.

But first, a few comments on our longer-term efforts on the commercial side of the business.

We are now in the fifth year of a six-year program that is vastly simplifying the way the company creates, tracks, communicates and shares all the date involved in aircraft manufacturing - from customer orders through production, delivery and support.

This major initiative is also simplifying the many processes used to schedule and order parts and manage inventory.

All told, about 400 old "legacy" computer and information systems are being replaced with four, new, commercial off-the-shelf system - just in time for the 21st century.

Then there's our "lean manufacturing" program, another long-term commercial airplane manufacturing initiative designed to cut out waste and promote greater efficiencies throughout the production process.

One of its key components is the kaizen workshop -- where individual manufacturing teams, using the widely-respected Japanese continuous improvement model, work together to find ways to rapidly reduce cycle time on the factory floor and eliminate defects in the manufacturing process.

Last year, 700 week-long workshops were held, resulting in as much as an 80 percent reduction in cycle time and manufacturing defects in individual manufacturing areas.

Based on the number of workshops held so far this year, we expect that more than 1,800 will be completed by year's end.

Last month, Boeing launched its newest lean manufacturing initiative, in partnership with Thyssen AG of Dusseldorf, Germany - an initiative consolidating the purchase of aluminum. And Boeing buys a lot of aluminum.

Before this initiative was launched, Boeing and its 500 aerostructure suppliers dealt individually with more than 50 distributors and 21 mills. During the next several years that's going to change dramatically.

By restructuring the aluminum supply chain - establishing a single distributor and a minimum number of mills for both external suppliers and Boeing parts shops -- speculative demand will end, costs will go down, and a continuous supply of raw material will be assured.

Deliveries under this new system will begin before the end of this year.

Now, let me now address several of the most prominent merger-related infrastructure initiatives, most of which relate to consolidations and realignments.

With U.S. operations at more than 100 separate locations in 27 states, employing about 238,000 men and women, the infrastructure challenge has been as much about dd1998 as it has been about the 21st century. It's been a challenge all around.

The objectives were simply stated: Eliminate duplication, find production efficiencies, reduce cost, and increase competitiveness.

In a series of announcements throughout the past year, all targeted on these very objectives, Boeing has met the challenge in a straightforward and hard hitting fashion.

During the next 16 months, though production will be rather steady, efficiencies will allow the company to reduce the work force by 18,000 to 28,000 employees.

In terms of consolidation, the company will close 18 million square feet of office, warehouse and manufacturing space within the next 28 months. The consolidation is well underway and though important savings in overhead costs will be secured, we will not lose one iota of capability.

To give an idea of the scope of what's going on, we're reducing the number of fabrication centers from 110 to 10, and the number of laboratories from 600 to 450.

In terms of individual business segments, the consolidations and realignments will result in the company having one major location each for the company's fighter business, military transport business, satellite business, space transportation business, and our information and communications activities.

On the commercial airplane side, the realignments give new flexibility to 737 assembly operations.

With a new 737 line opening in Southern California, Boeing can grow the business and more effectively utilize the company's assets. Importantly, the move to open a new 737 line was part of a detailed agreement with the union - and this opens a new and promising chapter in Boeing-union relations. Taken together, these actions are also very promising for 21st century aircraft manufacturing.

When you add it all up the challenges of manufacturing aircraft in the 21st century require both effectiveness and efficiency from everyone in our industry. We must do the right things-build the right products for the marketplace and maintain strong, capable industrial teams and we must do things right-use lean and efficient design and production systems to keep costs down and keep quality up.

When we do, we will successfully meet the challenges of the 21st century.

Thank you very much.