Sunday, August 28, 2011

Weathering the wind beneath their wings.

THE usually bustling industrial hub of Melbourne's Fishermans Bend, home to Holden's headquarters and a Kraft factory where Vegemite has been made for 85 years, is nearly a picture of calm on a Saturday afternoon.

That is, apart from the nearby Boeing compound, where dozens of cars are parked outside. Production is in full swing seven days a week at the sprawling plant, where hundreds are working away in a quiet pocket of Australian manufacturing to deliver an aviation game-changer to the world.

As the builder of composite wing flaps for Boeing's brand-new Dreamliner 787 aircraft, workers at the plant are in a race against the clock to lift their production rate, or risk wearing the blame for further delays to the rollout of the state-of-the-art aircraft.  

Three years late and billions of dollars over budget, the development of the 787 has been hugely embarrassing - and costly - for the American manufacturing giant. Boeing has heralded the Dreamliner as 20 per cent more fuel efficient than other planes of its size and capable of flying more than 15,000 kilometres.

The successful assembly of the 787 at Boeing's production plant at Everett, near Seattle, rests on outposts of its empire such as Fishermans Bend, delivering aircraft parts on schedule.

The big test for Fishermans Bend will come shortly after the keys to the first Dreamliner are handed to the launch customer, All Nippon Airways, on September 25. Shortly afterwards, assembly in the US is expected to ramp up sharply, placing huge pressure on the Melbourne plant to improve its output.

The company synonymous with US enterprise has made it clear it wants Melbourne to lift its game, and has spared little expense in throwing its considerable resources behind Fishermans Bend to jump-start the plant's lagging performance.

Earlier this year, Boeing flew in about 100 specialists from the US, including senior engineers and operational staff, at a cost of about $3000 a day each.

It came as Mark Ross, managing director of Boeing Aerostructures Australia since 2006, was called back to Seattle to work in ''a new position''. John Duddy, the boss of Boeing's Australian defence subsidiary, was announced as Ross's replacement in June.

After laying off more than 500 workers at Fishermans Bend during the height of the financial crisis, Boeing has hired 250 locals - including engineers and quality-control specialists - for work on the 787 program. It is now looking to hire another 200 local workers. In the meantime, Boeing says those workers it has bought in from the US will ''help fill a gap and train new employees''.

But insiders say the biggest unknown is whether the Melbourne plant will be able to increase the rate of production significantly without boosting the capability of its facilities.

The construction of the wing flaps using composite materials is the biggest contract at the Melbourne plant.

Boeing has forked out $200 million in recent years on the factory as it sharpened its focus on the 787. The federal and Victorian governments have also given Boeing $25 million between them for the Melbourne site.

About 60 per cent of the work at the plant is devoted to building the wing flaps for the 787. The rest is mostly building components for other aircraft such as Boeing's 737 and 777 passenger jets.

Despite the investment, some staff in Melbourne fear that the work on the wing flaps will be shifted overseas if they fail to lift the production rate when assembly in the US goes into overdrive.

They believe the precursor to shifting production elsewhere would be if Boeing decided to ''dual build'' - in other words, produce the flaps in both Melbourne and at an overseas plant.

Boeing will not comment on ''specifics'' about the 787 production at Fishermans Bend but said ''at this time we do not have any plans to produce the flaps elsewhere''.

''Boeing continues to invest in people, technology and facilities in Australia because we find significant value here in terms of a highly skilled workforce, innovation and expertise,'' it said in response to questions from BusinessDay.

The Melbourne plant is now churning out between five and six sets of trailing-edge wing flaps a month. But it is still a long way from reaching its near-term goal of 10 a month. Making production of the wing flaps difficult at Fishermans Bend has been sudden design changes.

Boeing recently increased the number of shifts that are being worked on the wing flaps at Fishermans Bend from two to three a day. Once built, the flaps are transported in large wooden crates to Boeing's huge production plant at Everett where the planes are assembled.

Seven delays to the Dreamliner have created headaches for airlines trying to manage their fleets, forcing them to fly their older gas-guzzlers for longer. Qantas has the second-biggest order in the world for the 787. Under Boeing's most recent timetable, Australia's national flag carrier was to take delivery of the first of its 50 Dreamliners late next year.

But further doubt was cast on a timetable two weeks ago when Qantas's chief executive Alan Joyce said the delivery was now not likely until early 2013.

Airlines such as Qantas will be relying in no small way on what goes on in Melbourne, as well as other parts of the world where composite materials for the 787 are being built. The wings are being made in Japan, fuselage sections in Italy and passengers doors in France.

The Melbourne plant also faces the same threat from the strong Australian dollar as other manufacturers around Australia. It has stoked fears among workers that Boeing will consider taking the work elsewhere.

Boeing has conceded that the strong currency ''clearly creates some challenges'', but said that it had taken out hedging to protect its operations against wild fluctuations in exchange rates. ''The value that Boeing finds in its Australian operations is only partly driven by cost,'' it said.

Boeing lauds the project as the ''largest aerospace project in Australia'', worth more than $4 billion in exports over the next two decades.

But the headwinds facing Australian manufacturing - including rising labour costs and an unfavourable exchange rate - make us less of a viable option for multi-national conglomerates to set up shop here. Those working at Boeing's Melbourne plant know they can ill afford any substantial hiccups to the production of wing flaps for the Dreamliner.

Local dreams rest on it.

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