Discomfort surfaces over second-tier selection 'pressure'

Selection of potential Asian second-tier suppliers for the Boeing 7E7 is holding back the completion of a contract between Boeing and the three Japanese "heavies".

Fuji, Kawasaki and Mitsubishi - selected last year to build 35% of the 7E7's airframe - are considering outsourcing a significant portion of their work to companies in China, South Korea, Malaysia, Taiwan and Vietnam, say industry sources. Selection of companies in these countries could help cement orders for 7E7s from their flag carriers.

While Boeing says selection of second-tier suppliers is up to the first-tier suppliers, the US manufacturer is believed to be pressing Japanese companies to outsource work to these countries. The companies, however, are not comfortable with the capabilities of all the companies seeking sub-supplier roles.

The Japanese heavies have visited several of the possible Asian sub-suppliers to evaluate their facilities. Sources say the Japanese companies seem to be willing to outsource work to Chinese factories because they have become more efficient in recent years, but are more reluctant to use factories in South Korea, Taiwan and in particular Vietnam. They say the Japanese government is also questioning the fairness of the proposed sub-supplier agreements, given that its decision to help the Japanese suppliers cover their 7E7 development costs was based on the 35% workshare allocation.

The government has refrained from setting a subsidy or loan scheme until a master programme contract is completed with Boeing.

The Japan Aircraft Development Corporation, representing the three Japanese first-tier suppliers, had planned to complete the master programme contract with Boeing by mid-year. The delay has forced the companies to cover initial costs without government loans.

"There are some aspects of the contract that Japan is not comfortable with and some aspects that Boeing is not comfortable with," says a Japanese industry source.

But Boeing denies the selection of second-tier suppliers is an issue of contention. "The qualification, selection and management of sub-tier suppliers is the responsibility of the tier-one supplier," says Boeing.

Work in China is believed to be required as part of an anticipated government order for over 50 7E7s. Supplier deals are also expected to influence campaigns at China Airlines, Korean Air and Malaysia Airlines, while sources say a contract Boeing is negotiating with Vietnam for four 7E7s may also include a local supplier deal.



Source: Flight International