September 26th was a great day for not just Boeing but the numerous small businesses who supplied parts to Boeing for the new 787 Dreamliner aircraft. Widely seen as the most innovative commercial airline in more than a decade, Boeing invested $23 billion in to research and development of this aircraft but the skies were far less than friendly to Boeing as the Dreamliner was plagued with years of delays.
While this was a financial drain for Boeing, the small and medium sized businesses that supplied parts and labor to the Dreamliner program found themselves under pressure as well.
AMT, a manufacturer of some of the Dreamliner’s skeleton was happy to see the first plane delivered. The problem with AMT and other small businesses supplying parts and labor came when the original production schedule experienced three years of delays. For a company like AMT, an uncertain production schedule means investing capital in to manufacturing parts and keeping workers on hold who have to install those parts.
New schedules were set and later changed leaving capital tied up in parts sitting in a storage facility for an unknown amount of time. This becomes even worse when companies borrow money in order to fund the manufacturing process especially if the payment conditions are unfavorable to time delays.
Kory Electronics is the company behind the cockpit controls in the Dreamliner. Like AMT, they invested a large amount of money, primarily in to engineering expenses to design the cockpit controls that wouldn’t be installed for years after the design process. Adding to the problem, Kory moved their operations to Washington, the site of the assembly plant for the Dreamliner. Although Kory says that their move wasn’t entirely related to the Dreamliner, they clearly expect to have a business that is based around the Dreamliner since it currently has a backlog of orders through 2019.
Now that the first aircraft has been delivered, Boeing is telling its suppliers to expect a large ramp up in manufacturing. Boeing expects to be at capacity within one year which means 10 plans each month. This is good news for the small and medium sized business who expect to see a large part of their business coming from Boeing.
Luckily, many of these businesses also supply parts and service to other airline companies around the world so cash has still came in during the three years worth of delays but seeing the Boeing Dreamliner program finally switching in to high gear relieves a lot of anxiety on the part of their accountants.