The president of Ran Tech Engineering, a metal aerospace components manufacturer with 60 employees close to Portland, Bill Cusick, attributes his company’s success in surviving the Machinists strike last fall to a significant shift in Boeing’s supplier strategy.
90% of Ran-Tech’s operations were halted during the strike because Boeing had told vendors to cease shipping parts.
However, Cusick had met Ihssane Mounir, senior vice president of global supply chain at Boeing Commercial Airplanes, a few months prior to the strike.
The leaders of roughly 20 small suppliers met with Mounir and his team in a series of meetings organized by Boeing through the Pacific Northwest Aerospace Alliance trade group. They were assured that Boeing would be a partner in resolving any issues that came up.
In an interview, Cusick stated that the 53-day strike was the “rubber meets the road.” During the strike, he lived up to the statements he made in the pre-strike meeting.
Boeing worked with Mounir to select some parts that it would need soon, the essentials to get us both by so that we might survive the strike, when Cusick informed him that Ran-Tech couldn’t keep the lights on if it had to stop all parts shipments.
Ran-Tech survived with components deliveries drastically reduced but not entirely halted.
“We are currently in a relationship,” Cusick stated. Forty-five people still have jobs on the shop floor, and I can keep to my timetable.
A few years prior, vendors were losing money from a Boeing program called Partnership for Success, which contrasted sharply with this relationship. Despite its name, the initiative put a lot of pressure on suppliers who gave Boeing their profits.
Boeing insisted that suppliers offer annual price reductions of 15% on their parts, citing the promise of increased job volumes as manufacturing rates increased as justification. Then-CEO of Boeing Jim McNerney threatened to drop, or add to a “no-fly list,” any company that didn’t step up.
Deeply hated, such price compression severely damaged Boeing’s components supply network and left many minor suppliers in ruins. However, after been driven to its knees over the last six years, Boeing is now a more modest business.
Boeing’s motto is “You do it my way or you’re done,” Cusick remarked, adding, “I would say is almost gone.” This most recent round has been excellent for teamwork.
Following Mounir’s speech at the annual local suppliers conference in Lynnwood last week, Shawn Hosford, a business development representative for several small businesses, including Ran-Tech, praised him for preventing the company’s demise during a Q&A session.
Regarding Mounir, who in December 2022 moved from leading jet sales to overseeing Boeing’s problematic supplier network, Hosford remarked, “He’s making a big difference.” He approaches business in a highly partner-focused manner. Relationship gold.
A switch away from Shareholders First
As many of you in this room are aware, Mounir explained in his presentation at the conference that even though a general halt to parts shipments was ordered during the strike, we repeatedly disobeyed that regulation when you guys brought up examples where you said, We cannot do that.
On a case-by-case basis, Boeing provided assistance where it could, regardless of whether it was due to financial difficulties or the workers’ probable permanent loss in the event of layoffs.
“The discussions were challenging, but we succeeded,” Mounir added. He expressed regret that some suppliers may have been overlooked by Boeing’s outreach and asked: If we missed you, please phone or get in touch. Both my team and I may be reached directly.
He also pledged to send quality inspectors, manufacturing specialists, and engineers to provide assistance if new work had to be passed to a supplier, which is always a possible danger.
Mounir vowed to be by your side the entire time. We are your partners. Additionally, we are only as excellent as you.
Boeing sales head Ihssane Mounir on September 23, 2021, in his office overlooking the Boeing facility in Renton, Washington.Banner, Ellen M./The Seattle Times/TNS
This marked a dramatic change in tone from previous ten years when Boeing executives spoke to vendors at the same point. Then it was: We’ll find another supplier if you don’t fulfill our deadlines and offer us reduced prices.
In an interview on the sidelines of the PNAA conference, supply chain expert and founder of consulting firm Aerodynamic Advisory Kevin Michaels stated that Boeing has adopted a more accommodating tone and acknowledges the need to assist suppliers, as the aerospace industry has been negatively impacted by the permanent departure of experienced workers due to the COVID pandemic.
He claims that Kelly Ortberg, the incoming CEO of Boeing and Michaels’s boss at Rockwell Collins in the 1990s, will strongly support this new approach.
“Kelly recognizes the value of having healthy suppliers,” Michaels added. He himself was a supplier. In terms of Partnering for Success, he was on the opposite side.
One of Boeing’s tactics to raise the share price that finally backfired and that Ortberg had to undo was the pressure on suppliers.
Additionally, under McNerney and subsequent CEOs, it stomped on its unionized blue-collar workers, outsourced work that was essential to the future, cut expenses everywhere, and regarded its engineers as expendable.
Speaking at the conference, Michaels said that the whole aerospace sector had experienced a period of gloom known as Shareholders First.
Although this has been a standard approach in corporate America since the time of former GE CEO Jack Welch, Michaels claimed that the aerospace industry has suffered particularly from the ongoing, short-term emphasis on quarterly earnings numbers.
The phrase “Shareholders First” is not exclusive to this sector. He claimed it’s everywhere. Nevertheless, our industry is long-term, requiring constant investment that might not provide results for ten or fifteen years.
He mentioned Honeywell as an excellent illustration of a business destroyed by this management style in a recent column he wrote for the trade publication Aviation Week.
Once a formidable force, Honeywell was a leading provider of avionics for the 777 and 737NG and the creator of vital aviation safety systems. However, in an effort to increase profits and the value of its stock, Honeywell cut expenses and stopped making investments in the future.
A ghost of its former greatness, Honeywell said on Thursday that it will split into three distinct businesses after alienating both customers and staff.
Even though Boeing took this turn, Michaels expressed optimism that it will turn around.
He declared, “I’m really bullish on Boeing.” Boeing has a leader who upholds moral principles. I believe Kelly will make this business better.
How Boeing can prune back and focus
“The aerospace supply network is still very weak at the level of smaller suppliers, where the prime manufacturers, Airbus and Boeing, have much less visibility,” Michaels cautioned during the conference.
He believes Airbus will not meet its ambitious target of delivering 75 single-aisle A320neo family jets by 2027 since many smaller suppliers in Europe are in severe financial difficulties.
As it speeds up, Airbus will face numerous parts shortages, particularly in the aerostructures and cabin interiors, he said.
Supporting their suppliers will be a top priority for Airbus and Boeing during any recovery.
To sharpen that focus, Ortberg plans to prune back parts of Boeing not core to its central military and commercial airplane businesses.
Offering advice on that, Michaels said Boeing should sell off large chunks of its Global Services division, formed in 2017 and headquartered in Plano, Texas.
To expand beyond supplying only Boeing spare parts, it acquired a giant distribution company supplying parts to airlines from many aerospace companies. Additionally, it acquired a different components distribution company that supplies minor parts to numerous manufacturers’ production lines.
Boeing s then-CEO Dennis Muilenburg announced the goal of growing this aftermarket unit into a $50 billion business a goal long since abandoned.
Elements of this organization have proved unwieldy.
When an airline needs a part, it must contact Boeing Global Services. If it needs technical support to install the part, it must contact Boeing Commercial Airplanes.
This doesn t make any sense, said Michaels. You can get rid of all that overhead.
He recommends retaining control of the Boeing proprietary parts, sending those back into the Commercial or Defense units as appropriate, but getting rid of the third-party distribution businesses.
Longtime aviation analyst Richard Aboulafia, a partner of Michaels at Aerodynamic Advisory and in recent years a severe critic of Boeing management, spoke optimistically at the conference of a turnaround in its fortunes.
I like what I m hearing out of Boeing and I m kind of a believer in their recovery plan, Aboulafia declared.
He did, however, reiterate his belief that Boeing needs to launch a new airplane soon to avoid further ceding the single-aisle jet market to rival Airbus.
He insisted Boeing mustn t move so late that a new jet would enter service in the late 2030s. A successful airplane could be launched much sooner and prevent further loss of market share, he said.
In addition to the ongoing challenges of part shortages due to weakened suppliers, Aboulafia, Michaels and other analysts at the conference spoke of the challenge posed by the unpredictability of the Trump administration.
Michaels said tariffs on imports from Canada and Mexico alone, if reinstated without aerospace exceptions, would amount to about a $4.5 billion tax on our industry.
Aboulafia on a discussion panel explained more broadly why tariffs could prove damaging.
In the former Soviet Union, he said, a closed aerospace industry produced airplanes that were not commercially viable; and he noted that modern China also seeks to create a homegrown industry that can build everything itself.
He contrasted this with the open Western model.
If you look at what makes this business great, it s people, capital, technologies, industrial capacity and ideas crossing borders, Aboulafia said. This takes a world of people contributing their ideas, their innovation, their capital, their technologies.
If you start screwing around with these tariffs, you re sending a message that in fact that one-nation model is better.
The world s enormous demand for new jets, which neither Airbus nor Boeing can fill right now, provides a clearly profitable future for the industry if the near-term challenges can be overcome and jet production ramped up.
Boeing s production rate is so low right now that parts shortages are not a critical problem.
But smaller aerospace companies, where pay is relatively low, continue to struggle to recruit and retain workers. The strength of Boeing s supply chain and the support Mounir s team provides will really be tested as 737 MAX production accelerates.
Mounir expressed guarded optimism.
By and large, we re seeing these supply chains starting to stabilize, he said. But there s still work to be done.
— Dominic Gates, The Seattle Times
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