The Boeing Company (NYSE: BA) has had significant problems meeting its schedule to deliver its new 787 Dreamliner. It has a nearly 900 aircraft backlog but it has delayed the delivery three times already. Now it looks poised to announce a fourth one -- as long as six months. This is making customers frustrated and is likely to cost shareholders.
The 787's delays have resulted from a variety of problems. The most significant was that Boeing outsourced some 70% of the design and manufacture of the 787 to suppliers around the world -- with the idea of snapping the pieces together in Washington state when the components were ready. But Boeing did not monitor the suppliers closely enough so it was surprised when some of them did not meet their production schedules.
Meanwhile, the strike by its machinists union has delayed by 10 weeks the delivery dates of the 3,734 jetliners in its order book. But the 787 is running into other problems such as still fixing bugs in the software that runs its systems, from the electric brakes to cockpit instruments. And with customers being frustrated by the missed delivery dates, Boeing is struggling with how much slack to build into the schedule so it can give them a truly firm date.
It could take as much as a year to both produce the 787 reliably and allow the Federal Aviation Administration (FAA) adequate time to certify the plane as safe to fly.
Virgin Atlantic Airways CEO Steve Ridgeway told the Wall Street Journal, "We're pretty fed up. We've got no clarity from Boeing." Virgin was originally due to receive its first 787 in 2011 but it now has no idea how long the delay is. Ridgeway called the 787 "the world's rarest airplane."
It wouldn't surprise me if some Boeing customers think of the 787 as the Nightmareliner.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing, will be published by Portfolio on December 26, 2008. He has no financial interest in Boeing securities.
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