Boeing Tells C-17 Suppliers Line May End in 2009
Due to the lack of U.S. government orders for the C-17 military cargo aircraft, The Boeing Company (NYSE: BA) is directing program suppliers to stop work on uncommitted airplanes. This move will be the first step in an orderly shut down of the production supply chain should no further orders be received from the U.S. government.
For over a year, Boeing spent its own money protecting the C-17 supplier base. This investment was intended to keep the production line viable while the U.S. Government and Boeing pursued international orders, and to allow time for the U.S. Government to update its post-9/11 mobility requirements, if they chose to do so. During that time Boeing received international orders and commitments for more than a dozen of the advanced air lifters. Congress has added funding for up to three more as part of its recent 2007 budget deliberations. However, when the orders are totaled, there are not enough to sustain continued production beyond mid-2009.
Since late 2005, Boeing has stressed the need for a commitment from the U.S. Government for continued C-17 procurement or the company would be forced to make the difficult decision to begin winding down the production line.
This action will ultimately affect the 5,500 Boeing jobs in California, Missouri, Georgia, and Arizona, directly tied to the C-17, and the program's nationwide supplier workforce that totals more than 25,000 people. Nearly 700 companies in 42 states provide parts and services that go into each C-17.
"The C-17 is one of the Defense Department's most successful acquisition programs ever," said Ron Marcotte, vice president and general manager of Boeing Global Mobility Systems. "No one questions its operational value. But we can't continue carrying the program without additional orders from the U.S. Government."
The stop-work orders affect long-lead items from suppliers that, in many cases, are built 34 months before a C-17 is delivered. Boeing is re-evaluating the financial impact should the U.S. government not order additional C-17s, and may incur costs aside from any recovered from the U.S. government.
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