Boeing recovers Down Under

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 raaf f/a-18, commonwealth of australia department of defence
 © Commonwealth of Australia Department of Defence

Inside a windowless, secure briefing room deep within a Brisbane office tower, John Duddy minces no critical words as he describes the team of executives who ran Boeing Australia until they were sacked nearly two years ago.

It was not just the string of delays and cost overruns on high-profile defence contracts, including the Boeing 737 Wedgetail airborne early warned and control (AEW&C) aircraft, High Frequency radio modifications (HF Mods) and the Vigilaire air defence system, that soured relations with one of Boeing's best customers globally over the past decade, Duddy says.

Until 1 August 2008, a leadership team headed by Australian native David Withers also frustrated Boeing's corporate bosses in St Louis and Chicago, Duddy says.

"With the team that was here, it was 'talk to the hand'," says Duddy, speaking of the previous Boeing Australia regime's apparent communication policy with the corporate office.

And Duddy should know. Now the vice- president and managing director of Boeing Defence Australia, Duddy was speaking to reporters in late May inside Boeing's headquarters in downtown Brisbane.

RESTORING RELATIONS

Duddy is a high-ranking member of a new group of US executives installed after August 2008 to restore relations - both with customers and corporate colleagues in the USA - and revive a potentially promising business.

As each of three prized contracts in Australia - Wedegtail, HF Mods and Vigilaire - sank deeper into trouble in the first half of 2008, Boeing's corporate executives perceived a "bunkered" mentality in its Australian-born leadership team in Brisbane.

For Withers, however, Duddy's comments reflect the opposite of his experience. In a telephone interview, Withers recalled one 12-month period during his tenure when Boeing Australia received 800 visitors from the US-based company, all of whom departed with the expectation that each of their recommendations would be implemented.

Instead, Withers' team "tried to pick the best of that", he says. "It's actually got worse over the last two years [for Boeing Australia] rather than better," says Withers, now an aerospace and defence consultant. "When I was there we were still winning business."

Since Withers' departure, Boeing Australia executives remain publicly optimistic. They must be. The new leadership team is expected to double Boeing's locally derived revenues to A$900 million ($746 million) a year over the next four years, with a newly revamped commercial aerostructures and repair business rising to complement a rapidly expanding defence portfolio.

More significantly, that figure does not include the sale of US-made products, such as 787 airliners to Qantas or C-17s to the Royal Australian Air Force.

With 3,000 employees spread across seven operating units in three states - Victoria, New South Wales and Queensland - Boeing Australia represents the company's largest presence in the world outside the USA, and a virtual microcosm of the 120,000-worker colossus based in the USA.

In Australia, Boeing's workforce does not build new aircraft, but it services Boeing and non-Boeing aircraft purchased by the Australian Defence Forces. It also provides training, builds a unique form of composite aircraft structure and operates Boeing-made unmanned aircraft systems on behalf of the Australian army.

In the next four years, Boeing has the opportunity to win new business worth more than A$800 million. New contracts planned to be let by Australian Defence Forces include a new helicopter to serve as a basic trainer, and a new fixed-wing aircraft to function as a primary trainer (for which Boeing is offering the Grob G120).

Boeing, at the same time, also must fight to win back market share lost to competitors as the relationship with the Australian military turned sour.

To win those deals, Boeing has worked to overcome more than the proposals submitted by its future competition. The new Boeing leadership also must restore confidence in Boeing as a reliable brand in Australia.

boeing
 © Boeing

The past year has seen a dramatic turn-around for company performance. The three most troublesome programmes have each stabilised. Albeit now four years late, six Wedgetails will be delivered by the end of the year. Vigilare is close to entering operational test. Meanwhile, the HF Mods has met all of its recent schedule goals, with the long-range communication system finally entering service last month.

"For the first time in a long time we're able to talk about the future," says Ian Thomas, president of Boeing Australia and South Pacific since early 2009.

Boeing's presence as a manufacturer in the Australia defence market began in 1996, and it was almost by accident. Then in the midst of consolidation frenzy in the US defence market, Boeing acquired Rockwell International. At the time, Rockwell operated a major business in Australia, supplying the combat data system for the Australian navy's proposed Collins-class submarines and managing an avionics upgrade for the RAAF's General Dynamics F-111 "Pig" fleet.

The RAAF also had purchased Boeing F/A-18A/Bs, but its inventory of Boeing-made aircraft would grow significantly in the last decade. The RAAF now operates four C-17s and is taking delivery of six Boeing 737 Wedgetails and 24 F/A-18E/Fs. Boeing also believes the RAAF could eventually buy at least one squadron of the 737-based P-8A as a maritime patrol aircraft. Further C-17 and Super Hornet sales are also possible, but not yet in the RAAF's planning.

UNCERTAIN FUTURE

By mid-2008, however, Boeing's future in Australia appeared far more uncertain. The Wedgetail contract awarded in 2000 had slipped three years behind schedule and forced Boeing to write off more than $1 billion in uncompensated cost overruns. Meanwhile, the legacy Rockwell business struggled to deliver the HF Mods contract and the Vigilaire system.

It was also clear that Boeing's customer was becoming frustrated with the company's seemingly systematic problems.

If any action confirmed the Defence Materiel Organisation's (DMO) growing pique, it happened in May 2009. Boeing had been providing maintenance and modification support for F/A-18A/B Hornets in Australia. In a move widely seen as punitive, the DMO awarded a follow-on, four-year maintenance deal for a Boeing-manufactured aircraft to a team of BAE Systems Australia - now Boeing's biggest rival in Australia - and L-3 MAS Canada.

Despite the setback, Boeing is continuing to do some work on the Hornets. Ongoing contracts including making the provisions for the Hornet 2.3 upgrade, which rewires the aircraft to operate a new jamming pod, thought to be that of the Elta Systems 8222.

But Boeing's lost Hornet maintenance business is potentially worth A$150 million through 2012.

CHANGE OF DIRECTION

At the time, it was widely believed that Boeing's future in Australia was in jeopardy without a major change of direction by the company's management.

The headline of the press release on 1 August 2008 announced: "Boeing realigns Australia defence operations to mirror global organisation."

With that announcement, Boeing began a nearly year-long series of leadership changes at the Brisbane office, starting with Withers, who the press released noted "will now leave the employ of the Boeing company".

boeing insitu pacific scaneagle uav, boeing
 © Boeing

Thomas, who previously launched Boeing's corporate presence in India, was shifted in early 2009 to Brisbane, where he is now president of Boeing Australia and South Pacific.

Rick McCrary, previously McDonnell Douglas' top salesman in Australia in the late 1990s, was recalled from St Louis to Brisbane as vice-president of business development for Australia and New Zealand.

Finally, Duddy moved from Boeing's space business in the USA to oversee the company's growing defence operations in Australia.

In January, Duddy also was appointed as vice-president and general manager for Boeing Global Services and Support in Australia, which Boeing views as its premier vehicle for revenue growth over the next decade.

It is an executive team remarkable for being composed of so many US citizens, albeit with long experience and deep contacts within Boeing's international network.

Standing behind Boeing's US leadership in Australia, however, is a new cadre of native-born managers, who have served in a variety of roles across Boeing. With Boeing's programme's stabilising here, the current leadership is expected to rotate out shortly, allowing native Australian executives to take control.

McCrary says the "poster child" of Boeing Australia's future leadership is Steve Parker, vice-president and general manager of the Brisbane-based unit of Boeing Networks, Systems and Space. An Australian, Parker has been posted at Boeing's defence offices in Seattle with the P-8A programme.

In the future, Boeing Defence Australia is looking beyond its host government for potential sales. Export deals of Boeing defence equipment designed and manufactured mostly in Australia are also possible.

Boeing's Insitu Pacific subsidiary, based in Australia, has offered to operate the ScanEagle on behalf of the Singapore navy. Boeing executives describe the Vigilaire air defence system as a globally competitive capability, with interest in the United Arab Emirates.

Boeing officially traces its operating roots in Australia to 1927, the year Hawker de Havilland established a business in the Bankstown community in New South Wales. Boeing acquired that business in 2000, which had become what Thomas calls a "merchant supplier", producing structures for hire to all of the major aircraft manufacturers, including Boeing rivals Airbus and Lockheed Martin.

Although the Bankstown facility represents Boeing's past in Australia, the business is not part of Boeing's future.

Earlier this year, Boeing Australia announced the Bankstown facility would be shut down as the company shifts its strategy. No longer will Boeing's aerostructures business in Australia stand apart from the corporation's global strategy.

FOCUSING SUPPORT

In the future, the recently renamed Boeing Aerostructures Australia facility will focus on supporting Boeing products only. Fabricating winglets for the Airbus A330/A340 will cease in mid-2011. Shipments of the wingtip and fence for the A380 will stop even sooner in September. Flaps for Lockheed C-130J airlifters remain on contract through the first quarter of 2014, but Boeing will try to transfer that work back to Lockheed by 2012.

At the same time, a few programmes could linger. Boeing has not decided whether it will give up work on the composite dorsal fin for the BAE Systems evolved sea sparrow missile, but the company's interests in the manufacturing technology might keep it going. The same thinking also applies to a high-temperature tailcone supplied for the Bombardier Challenger 300 business jet, where Boeing actually is bound to a lifetime contract.

The company's focus on commercial operations is the Fisherman's Bend facility outside Melbourne. The recently renovated factory is where the company makes the rudder and elevator on the 777, the movable leading edge on the 747-8 and - most importantly - moving trailing edges on the 787.

The 787 works now represents 50% of Boeing's business at Fisherman's Bend, and is projected to account for about $4 billion in business over the next 20 year, says Mark Ross, managing director of Boeing Aerostructures Australia.

The facility has become a centre of excellence within Boeing for building composite aircraft structure. Eight autoclaves inside the Fisherman's Bend facility measuring 15m (50ft) allow Boeing to cure the resin that reinforces the carbon fibre matrix.

The key technology used on the 787 here, however, does not rely on autoclaves. Instead, Boeing's Australian division has developed a method for curing a specially developed resin identified inside the factory as "DXD2000". Instead of heat-pressurising the resin inside an autoclave, this Boeing facility uses a proprietary infusion method.

The concept "bought its way" onto the 787's 10m-long movable trailing edges, Ross says. But the potential of the resin infusion method could grow as Boeing explores new platforms, such as a next-generation narrowbody airliner or a replacement for the 777.

"On the next Boeing platform I would expect to see more resin infused material than on [the 787]," Ross says.

Asked whether the technology could migrate from trailing edges to load-bearing structures, such as the wingbox and fuselage, Ross says the capability of Boeing's resin infusion process is not limited to its current applications.

"Resin infusion is in its infancy," says Dong Yang Wu, Melbourne Centre director of Boeing Research and Technology Australia, which supports Ross's business unit. Wu describes the process used on the 787 parts as first-generation resin infustion technology.