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Where Boeing Stands Now

Grounding of the 787 raises the questions about the aircraft maker's sourcing strategy

Published: Feb 11, 2013 06:36:52 AM IST
Updated: Feb 11, 2013 11:36:40 AM IST

Where Boeing Stands Now
Image: Getty Images

Boeing invested an estimated $25 billion in developing the 787—introducing radical changes in materials and a component-sourcing strategy that was to bring efficiencies for the aircraft-maker and airlines. The grounding of the aircraft raises doubts about these decisions.

1. Critical Decision 1: Lithium-ion

The fact that lithium batteries can overheat and ignite if improperly charged or discharged, is well known. Yet, the batteries are lighter, more efficient than other options like nickel-cadmium (Ni-cad) or lead acid. They allowed the 787’s control systems to be powered by electric motors, compared to less efficient hydraulic systems.

A.  Had it been tried before?
In 2011, the US aviation regulator, FAA (Federal Airworthiness Authority) forced business jet maker Cessna to replace Li-ion batteries on its new model CJ4. It was replaced by Ni-cad. However, Cessna plans to qualify Li-ion batteries for use in its new aircraft still being developed.

Where Boeing Stands Now

B.  So, what went wrong with the 787?
It is not the battery type, but how well it’s monitored that’s key to safe use. On the 787, the battery is integrated into an electronic system designed to prevent overcharging. In the All Nippon Airways fire on January 16, it is still unclear if it was the battery that failed, or the monitoring.

Where Boeing Stands Now
2. Critical Decision 2: Outsource Components
Questions are now being raised about Boeing’s decision to farm out design and production work—about 70% of the 787’s components are sourced from partners. Tokyo stock exchange-listed battery-maker GS Yuasa, who supplied the Li-ion batteries, is at the centre of the investigations.

3. What Are Boeing’s Losses?
A.  It may lose its lead to Airbus: In 2013, the plane-maker said it hopes to deliver 635 to 645 planes. If the issue is not sorted quickly, some airlines could start canceling orders. Boeing has orders for 800 787s, which includes 27 planes for Air India.

B. It may have to take write-offs of up to $5 billion as well as reimburse airlines for their losses. Its factories, as well as those of dozens of suppliers, were ramping up to maximise production. Boeing will have to bear these inventory costs.
Where Boeing Stands Now
Image: Corbis

4. Who Else Will Get Affected?
A.  Airbus also plans to use Li-ion batteries in its new plane, the A350. If the FAA orders a battery change, the grounding of the 787 could well run into months. Certification of new batteries and the related electrical systems could take long.
Where Boeing Stands Now

B. Component maker Japanese heavy engineering companies including Mitsubishi and Kawasaki have a huge stake—they’ve put up massive foundries to manufacture parts for the 787, like the wing and the fuselage. The project is likely to add significantly to Japan’s own ambitions as a large jet manufacturer. Japanese carriers JAL and ANA are big 787 customers.

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(This story appears in the 22 February, 2013 issue of Forbes India. To visit our Archives, click here.)

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  • Girish

    There is no doubt that the Li-ion batteries have caused a real serious concern to Boeing and the users of 787. The airlines which have already placed firm orders are also in no good state, since they would have made other associated plans which would be costing them dear. In view of the severe financial loss being faced by the airlines , why cannot boeing step into some kind of modification to release the aircraft for flights and the investigations on the original battery can continue. This will mitigate the financial loss being faced by the airlines and also boeing.

    on Feb 15, 2013
    • Cuckoo

      Girish, It is probably impossible for Boeing to figure on a quick-fix patch to the problem. The FAA and JAA are closely involved- and any solution will have to be approved by them. Moving back to Ni-Cad batteries would mean making so many related modifications, that would need even more time on the ground. It was a risk that sadly did not paid off. As things stand now, they will have to find ways to make the Li-ion system safer.

      on Feb 18, 2013
  • Flysafe

    Boeing executives misled regulators in Japan and the United States. In The development history of the 787's charging system and battery is shrouded in fire, lawsuit and controversy. In November 2006, a devastating fire and explosion at the plant which makes the charging system leveled a three story building at Arizona manufacturer Securaplane. Whistleblower lawsuits filed since then have shown a deep history of malfeasance and disingenuous conduct on the part of Boeing executives in their rush to overcome program delays and bring ths 787 into service. Much more to this story than meets the eye; the good people at Boeing who worked hard to bring the Dreamliner to fruition deserve to see the aircraft reach its potential as the breakthrough it is.

    on Feb 11, 2013