Boeing Shaking Up Supply Chain -- Update

By Doug Cameron 

Boeing Co. could bring more work in-house as part of an effort to reduce the cost of building jetliners that also includes introducing more automation and job cuts.

The aerospace giant buys between 60% and 70% of the parts for its commercial and military products from external suppliers that have been pressured to reduce prices and boost efficiency, often in return for a greater volume of work as Boeing boosts jetliner production.

"We are thinking through future supply chain architecture," Chief Executive Dennis Muilenburg said on an investor call after Boeing reported quarterly earnings that beat forecasts and bumped up its full-year guidance.

Boeing has already brought some large components back in-house, notably wings for its new 777X jet at a new high-tech facility near Seattle that showcases the company's efforts to introduce more automation in its manufacturing.

Mr. Muilenburg said Boeing can expand its vertical integration, though could also boost competition between existing suppliers to reduce costs and improve efficiency as it battles with Airbus SE for market share.

Boeing has already cut around 27,000 jobs over the past five years and in recent months has announced more than 2,000 further voluntary and involuntary layoffs.

Mr. Muilenburg declined to comment on when Boeing would reach a floor for its workforce, though he said the company had hired more than 11,000 new workers over the past two years.

His comments came as Boeing reported a net profit of $1.45 billion for the quarter compared with $1.22 billion a year earlier, even as sales dropped 7% to $21 billion following a decline in deliveries of commercial and military aircraft.

The quarter included $120 million in additional costs on the KC-46 military tanker that has already triggered more than $2 billion in charges.

Mr. Muilenburg remained bullish on jetliner production, citing customer pressure to boost monthly output of its best-selling 737 jet above the 57 planned by 2019 from 42 at present.

Separately, Mr. Muilenburg declined direct comment on media reports that Apple Inc. could invest in the company's plan to develop hundreds of small satellites to provide new global broadband access.

"That business thrives on industrial partnerships," said Mr. Muilenburg when asked about a potential tie with Apple.

Write to Doug Cameron at [e-mail]

(END) Dow Jones Newswires

April 26, 2017 12:36 ET (16:36 GMT)

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