Will China Kill Boeing's Most Important Airplane?

By Justin Rohrlich How important is Boeing (BA) to the US economy? The company's $29 billion worth of foreign sales in 2009 singlehandedly comprised about 2% of America's total exports. And, even though unprecedented portions of Boeing's $33 billion supply chain are outsourced -- particularly for the beleaguered 787, a project which is three years behind schedule -- according to Boeing estimates, it is indirectly responsible for 1.2 million stateside jobs. Parts for the 787 are manufactured in just about every corner of the globe:

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The horizontal stabilizers come from Italy's Alenia Aeronautica. Latécoère of France manufactures the passenger doors. TAL Manufacturing Solutions of India is making the floor beams. Boeing gets its titanium from the VSMPO-AVISMA Corporation, a Russian firm. Even China is supplying components for the 787. Chengdu Aircraft Industrial Group is the sole supplier of 787 rudders. Shenyang Aircraft Corporation is the sole supplier of 787 vertical stabilizer leading edges. Harbin Aircraft Manufacturing Corporation is the sole supplier of 787 wing-body fairing panels.

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What's different about this than sourcing doors from France or floor beams from India? Dick Nolan, the William Barclay Harding Professor of Business Administration at Harvard University, writes in the Harvard Business Review; “To finance the development of the 787 and secure global orders, Boeing agreed not only to outsource an unprecedented amount of the plane's parts to partners in Europe, Japan, and China, but also to transfer to them unprecedented know-how. Before the 787, Boeing had retained almost total control of airplane design and provided suppliers precise engineering drawings for building parts (called ‘build to print'). The only exception was jet engines, which have long been designed and manufactured by suppliers such as GE (GE), Rolls-Royce, and Pratt & Whitney (UTX).

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“The 787 program departed from this practice. Boeing effectively gave Tier 1 suppliers a large part of its proprietary manual, ‘How to Build a Commercial Airplane,' a book that its aeronautical engineers have been writing over the last 50 years or so. Instead of ‘build to print,' Boeing provided suppliers with performance specifications for parts and components and collaboratively worked with them in the design and manufacturing of major components such as the wing, fuselage section, and wing box.” Yeah, okay. So? What does any of this have to do with China, specifically? Bear with me, here -- it has less to do with the 787 and everything to do with the 737.

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