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Clouds of doubt hang over Vought

Dreamliner team member says it has fixed its problems

11:19 PM CDT on Monday, May 12, 2008

By VICTOR GODINEZ / The Dallas Morning News

When Boeing Co. said last month that its new 787 Dreamliner would be delayed again, a lot of people blamed Dallas-based Vought Aircraft Industries Inc.

The much-anticipated 787 is widely hailed as a marvel of technology, constructed of strong and durable composite material and designed to be one of the most fuel-efficient airliners ever.

Roughly 900 have already been ordered.

But the rollout of the plane has also been dogged by delays, and Vought has been at the center of the problems.

The most recent delay, announced in April, pushed the first flight of the 787 to the end of this year and the first delivery to customers into the third quarter of 2009.

Vought is one of numerous subcontractors helping build the high-tech jet under a new system by which the plane is built in chunks by different companies and shipped to Boeing for final assembly.

While other subcontractors have had their own problems with Boeing's initial schedule, Vought is widely considered to have had the most trouble.

Vought builds two sections of the rear fuselage in South Carolina and installs various hydraulic and electrical systems in those sections.

Vought has about 300 workers in the Dallas area working on the 787 out of a total local workforce of roughly 3,500, and 333 employees working on the 787 in South Carolina, with 268 additional contract workers on site.

Overall, Vought has about 6,500 employees.

'Pretty much fixed'

Vought's pedigree in the airplane building business is long and storied, and the company has particular expertise in the cutting-edge composite material used in the 787's skin.

But adapting to the new business model laid out by Boeing was tough for Vought, as chief executive Elmer Doty freely admits.

Mr. Doty says Vought has made huge improvements compared with a year ago, though.

"787 was a real challenge," he said. "We were right in the middle of the first unit and all the start-up challenges and lots of engineering challenges. Here we are today, and I can say the base business is pretty much fixed."

Boeing agrees, and some experts say that Vought is in a stronger position.

Standard & Poor's Ratings Service, for example, recently raised its outlook on Vought to stable from negative, as Vought announced it had secured a $200 million loan to support its work on the 787.

And Gulfstream Aerospace Corp. recently recognized Vought for its efforts on some of Gulfstream's jets.

Boeing said that Vought can't be singled out for the 787's delays.

"It wouldn't be fair or accurate to say that any one partner caused the delay," said spokeswoman Loretta Gunter.

"The production system took longer than anticipated to get going."

Snags and solutions

But aviation industry analyst Scott Hamilton said that Vought has long been seen as the main source of trouble on the 787.

"Boeing was very careful on those conference calls not to name names, but everyone knew who they were talking about," he said.

Boeing did have to publicly address Vought's struggles in March when it bought Vought's share in a joint venture that connects the fuselage sections Vought builds to the rest of the plane.

Mr. Doty said that buyout made sense because the joint venture – called Global Aeronautica – turned out to be more reliant on Boeing's oversight than originally thought.

Mr. Doty said that another issue was that the firms supplying the parts that Vought needed to build the two fuselage sections were unable to keep up.

One of the biggest snarls on that front was the floor structures that Israeli firm IAI Ltd. was supposed to be shipping nearly intact to Vought.

But, at least initially, the floor structures arriving at Vought's plant were nowhere close to finished.

Vought would often have to ship those parts off to Boeing for final assembly, slowing down construction even more.

But things have improved dramatically since then, said Joy Romero, vice president of the 787 division at Vought.

Ms. Romero joined Vought last October from Boeing, where she was director of North American supply chain integration on the 787 program.

Vought now expects to be able to ship nearly 100 percent complete sections to Boeing by the end of this year, Ms. Romero said.

"We're very close to getting 100 percent of our supply chain up and running and everything come in exactly like we want it to," she said.

Ms. Gunter at Boeing said Vought's performance has improved.

"The condition of assembly on each unit being delivered is markedly better," she said.

But Mr. Hamilton, the aviation analyst, said Vought still has work to do and can't blame all its troubles on its suppliers.

"Vought clearly had its own manufacturing issues," he said.

Can it keep up?

Mr. Hamilton also said that while Vought is a longtime Boeing subcontractor, this is Vought's biggest undertaking, and it's not clear whether the firm is big enough to handle it.

"I would not want to handle one bigger," Mr. Doty concedes.

The company's SEC filing on the $200 million loan from Lehman Commercial Paper Inc. says that Vought that doesn't expect to turn a profit on the 787 until it delivers its 300th section to Boeing. The company recently delivered its fifth section.

But Mr. Doty, who visits the South Carolina production site about once a month, said Vought can meet Boeing's new timetable of shipping 10 planes a month by 2012.

"If you look at our financials, at the amount of cash we're putting in, it's a big program for us, and we're getting it done," he said.

"I would say out of the structures partners, we're the smallest by far," he said. "And it's thrilling to be part of this and thrilling to be keeping up with the global partners.

"These are big players, and we're keeping up."

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