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Cablegate: Boeing 787 Production Delays and Response in Nagoya

VZCZCXRO8370
RR RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHNAG #0015/01 1010903
ZNR UUUUU ZZH
R 100903Z APR 08
FM AMCONSUL NAGOYA
TO RUEHC/SECSTATE WASHDC 0218
INFO RUCPDOC/USDOC WASHDC 0014
RUEHKO/AMEMBASSY TOKYO 0225
RUEHKSO/AMCONSUL SAPPORO 0120
RUEHOK/AMCONSUL OSAKA KOBE 0151
RUEHFK/AMCONSUL FUKUOKA 0123
RUEHNH/AMCONSUL NAHA 0123
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEHNAG/AMCONSUL NAGOYA 0235

UNCLAS SECTION 01 OF 02 NAGOYA 000015

SIPDIS

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: ECON EAIR PREL JA
SUBJECT: BOEING 787 PRODUCTION DELAYS AND RESPONSE IN NAGOYA


NAGOYA 00000015 001.2 OF 002


Summary
------------
1. (SBU) The recently announced delay for the Boeing 787
results from global supply chain and production issues. A
recent visit to the Fuji Heavy Industries factory making the
787's center wing section and discussions with Fuji and Boeing
787 program executives indicate that those problems continue but
that progress is being made, in part through long-term dispatch
of American engineers and workers to assist production at
Japanese plants.

New 787 Schedule
-----------------------
2. (SBU) Marking the third revision to its delivery schedule
for the 787 "Dreamliner," Boeing announced April 9 that it is
delaying first flight of the plane from the second to fourth
quarter of 2008 and now anticipates delivering approximately 25
of the new planes in 2009, down from its most recent projection
of 109. On April 10, Patrick Kelley, Boeing's Director for 787
Japan Production, described to Principal Officer Boeing's
extensive exercise to "teach the Japanese partners to fish." In
other words, Boeing is working to get the suppliers up to speed
on production techniques for the carbon composite aircraft, but
not doing their work for them.

3. (SBU) At an April 8 visit to the Fuji Heavy Industries (FHI
or Subaru) 787 center-wing section plant in Handa, Aichi
prefecture, Principal Officer saw American staff working
together on the factory floor with FHI's Japanese line workers.
Kelley explained that Boeing has dispatched 28 American contract
workers from aerospace labor supply firm Plane Techs to help
deal with a backlog of work resulting from a fastener shortage.
Kelley said Boeing accepted responsibility for the fastener
shortfall, and did not place the blame on its Japanese suppliers
for that issue.

Fastener Issues
-----------------
4. (SBU) Boeing has reportedly discovered the center wing box
(the "heart" of the plane where the wings and fuselage meet)
needed to be stiffened beyond the original design. This has
made the catch-up process even more difficult. The unique
nature of the fasteners used on the wing and wing box, which
require greater lightning resistance than those used on
traditional aluminum jets, has added to the delay in 787
fastener supply. And, because hundreds more clips and fasteners
per plane are needed to stiffen the center wing section, even
more of those fasteners are required than originally planned.

Traveled Work and Traveling Labor
--------------------------------------------
5. (SBU) Despite those challenges, Boeing Structures Procurement
Agent Randall Greene, who works out of the FHI plant, described
FHI as being in the best shape among the three major Japanese
suppliers and at "near 100 percent" in terms of completing its
workshare. This progress is key. "Traveled work," or assembly
supposed to be done by suppliers but left uncompleted and passed
to Boeing to take care of as part of final assembly, has been a
major factor in 787 production delays to date. FHI has now
shipped the first five center wing sections to Boeing, and has
ten currently in production flow. We saw the sixth and later
sections being fitted with hydraulics and electrical systems,
illustrating Greene's appraisal that FHI is passing on complete
or nearly complete components to the next stage of production.

6. (SBU) In addition to the 28 Plane Techs personnel at FHI,
Boeing has 15 of its own staff full-time on-site and an
additional number of TDYers. In comparison, at the other major
suppliers, Boeing has 40 to 60 of its own staff and 70 Plane
Techs workers at Mitsubishi Heavy Industries (MHI), which makes
the 787's wings, its largest and most complex component, and 20
Boeing staff but no Plane Techs personnel at Kawasaki Heavy
Industries (KHI), which produces the 787's forward fuselage.
While the Plane Techs staff are mostly engaged in dealing with
fastener issues, many have moved into other areas of production
as well. Boeing staff are working on a range of issues,
including engineering, supply chain control, and program
management.

Comment
------------
7. (SBU) The Boeing and FHI staff we spoke with this week
acknowledged they're under the gun to keep to schedule but
appeared confident they're making progress and will be able to
meet the revised schedule. The stakes are enormous. Boeing has

NAGOYA 00000015 002.2 OF 002


already taken nearly 900 orders for the plane, and Nagoya-area
manufacture of 787 components is frequently described as the
largest production project ever undertaken by a foreign company
in Japan. FHI is a supplier for all six generations of Boeing
commercial airliners from the 737 to 787, among many other
civair projects and has a full range of defense programs for the
Self Defense Forces. FHI Vice President for Manufacturing
Haruyoshi Saigoku told us, though, that once the 787 reaches
full production, it will account for about 30 percent of all FHI
aerospace sales.

8. (SBU) As if current demands on the regional aerospace sector
weren't enough, a major new project is about to get underway.
On April 1, Mitsubishi Heavy Industries formally established a
Nagoya-based company to go forward with the MRJ regional jet
program. FHI and KHI are expected to supply significant
components.
ROCHMAN

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