Boeing CEO explains N. Charleston expansion, 787 fix after strong earnings report

Boeing CEO explains N. Charleston expansion, 787 fix after strong earnings report


Boeing’s top executive shed some light Wednesday on why the planemaker is expanding in South Carolina, saying the company needs multiple options “from which we can draw talent and use capital.”

Boeing announced plans this month to invest another $1 billion and add 2,000 jobs over the next eight years in North Charleston, where more than 6,000 workers make parts for and assemble the 787 Dreamliner.

In exchange, the company will receive $120 million from the state and is poised to get generous tax breaks courtesy of Charleston County.

Based in Chicago, Boeing’s historic headquarters is the Puget Sound region of Washington, where it still makes most of its planes, including 787s.

Asked about the local growth plans, CEO Jim McNerney said “we see South Carolina as exceeding expectations in terms of its performance to date,” prompting the company to “deepen our engagement down there.”

“South Carolina and we have put together a deal that offers incentives to us but asks us to perform against those incentives,” McNerney said during a quarterly conference call to discuss earnings. “We’re going to need a number of places from which we can draw talent and use capital, so we’re very pleased that South Carolina is moving along as well as it is.”

McNerney spent more of the call addressing the 787 battery situation, which he called “disappointing and frustrating from the outset,” but now well in hand. He conceded that the technological leaps Boeing attempted in the 787 had come at a cost.

“As you make the first bite at that apple, you tend to be on the bleeding edge for a while, and I think that was the case for the 787,” he said. “That’s not an excuse. We should’ve been more disciplined about the way we went about that.”

The Federal Aviation Administration grounded the plane on Jan. 16 after a pair of smoky battery malfunctions, one on the ground in Boston and the other in the air over Japan.

The FAA approved Boeing’s package of battery-system adjustments Friday, and the company has since begun implementing it on its customer airlines’ 787s while resuming production flights at its factories.

McNerney said the company has started installing the fix on 10 of the 50 Dreamliner jets that have been delivered to airlines, as well as on nine 787s that are in production. He said the majority of the modifications will be done next month, which is also when deliveries will resume.

“I think as ‘mods’ go, in the end … this is not a big one,” McNerney said of the multi-part redesign of the lithium ion battery system, which includes a containment box and a venting mechanism. He said the changes to the electrical system are “not rocket science.”

Boeing finance chief Greg Smith declined to say how much the three-month grounding of the flagship jet had cost, repeatedly describing the financial impact as “minimal” and saying it was absorbed through shifting research and development priorities.

Despite the disruption, Boeing still plans to deliver more than 60 787s in 2013, with perhaps a fifth of those coming in the spring quarter. Six 787s are on the flight line outside the North Charleston assembly plant.

Boeing is transitioning to a production rate of seven 787s per month between North Charleston and Everett, Wash., plans to be making 10 of the jets each month by the end of the year, and is considering the possibility of eventually building at an even higher rate.

McNerney said the first 787-9 strech Dreamliner, which will factor into that rate, would enter the Everett final assembly factory later this year and be delivered early next year.

He said the in-demand 787-10 double-stretch Dreamliner and the new version of the 777, which will rely on the wing technology and other experience from the 787, will likely be launched this year.

Reach Brendan Kearney at 937-5906 and follow him on Twitter at @kearney_brendan.