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insight - as boeing, airbus factories hum, suppliers get rattled

by:QY Precision      2019-09-05
NEW YORK (Reuters)-
These days, the world\'s largest aircraft manufacturers are soaring, thanks to historic demand for new aircraft that have lifted their factories to record speeds.
However, the boom in aircraft sales is far from being a great asset to suppliers, which has intensified the brutal competition between the Airbus Group NV (AIR. PA)and Boeing Co (BA. N)
They ask companies that make billions of parts they need to make factories to offer better deals.
This is a common name plate company. The 400-
Employee Seattle company put a logo and placard on everything from overhead bins to emergency exits: About 1,500 signs per aircraft, or 1.
Boeing alone has 6 million in a year.
In the past three years, Boeing has increased the production of jet aircraft by 40%, which requires not only more signs on GM\'s nameplate.
Paul Michaels, director of aerospace at the aircraft Department GMN, said it also wants to cut prices by 15 to 20%.
\"It\'s big,\" Michaels said . \".
Boeing also wants GMN to show that it can meet faster production speeds and keep the business financially healthy.
The company spent a week in the factory with two Boeing planes.
Michael said he now expects to reach the price target by 2016 and will eventually become better.
But \"it\'s nerve --
Very hard at first
\"Price pressure makes a lot of small-
In terms of whether to invest and grow, sell to big companies, or simply fold, grade suppliers are working hard.
\"It forces the vendor to either say I\'m in the game or say I\'m not in the game,\" said Christian Schiller, general manager of Cascadia Capital, investment bank of Seattle.
\"They can\'t move.
He and others predict that the industry\'s acquisitions will increase this year as pressure increases, although the prices of small companies are already relatively high.
As the supplier provides more than two
By value, they are the obvious places for Boeing and Airbus to find cost savings.
However, over-extrusion can lead to confusion in production and hurt an industry that is difficult to keep up with the growth of demand.
Airbus said last week it would raise its single-
Nearly 10% aisle A320 aircraft matched similar moves by Boeing.
Both companies are also building many of their pairs.
Plan at a faster speed.
Boeing and Airbus will produce 2017 amazing new jets each month, with a total of 138.
Embraer SA, small aircraft manufacturer (EMBR3. SA)
Bombardier Corporation (BBDb. TO)
It is also increasing production to bring new jets to market.
Suppliers say as thousands of suppliers accelerate, Boeing and Airbus compete with each other in price competition to lower supplier prices more than in the past.
Boeing says it will put companies that don\'t cut prices on the \"no fly\" list that prohibits them from working in the future, while rewarding companies that have the opportunity to bid for more jobs.
Both aircraft manufacturers are also vying for parts markets, demanding royalties on parts sold directly to airlines and never entered their factories.
It\'s a good thing to ask for a lower price in exchange for sales.
Well-known strategies in other industries.
Big retailers like Wal-Mart
Known for Wal-Mart and Costco Wholesale companies.
But now the massive price cuts for suppliers are new and hard landing in industries where sales are relatively low.
Boeing and Airbus also make far less revenue from selling finished aircraft than from suppliers.
For example, the operating profit margin of Boeing\'s jet business is 10.
Last year was 8%, compared with an average of 16% suppliers.
Airbus\'s commercial aircraft made a profit of 4%.
Captain Tom capt, head of global aerospace and defense consulting operations at Deloitte, said: \"There is a legitimate complaint from aircraft manufacturers . \".
To some extent, aircraft manufacturers are victims of their customers\' airlines.
The plane is a technical miracle, the operation is very precise and safe, but the public flying still requires a cheaper fare than a good hotel room, and the cost of jet fuel may still be high.
As a result, airlines are paying hard bargains for aircraft as little as possible.
Boeing is selling some jets more aggressively as Airbus has gained 60% of the new aircraft market
The aisle aircraft market represents more than half of the new aircraft delivered over the next 20 years.
Boeing recently launched an internal campaign to gain market share and began more negotiations on price issues.
But it needs to reduce the cost of making aircraft.
Boeing and Airbus are also pushing suppliers to do the same and helping to improve their operational efficiency.
Stan Deal, vice president of Boeing\'s supply chain, said of its costs: \"This will not disappear
Cooperate for success.
The most important thing for Boeing is to keep or win our long term, he said.
Competitive advantage.
Of course, many suppliers also benefit from the boom.
Larger companies and companies with proprietary products say they have more leverage to withstand price pressures.
Even if profit margins fall, larger volumes can make up for and increase total profits.
Still, concerns are rising as many of the smaller suppliers lack funding and talent to make price concessions requested by aircraft manufacturers.
\"Some suppliers will be in trouble and may not be able to meet the challenge, thus shutting down or signing contracts that they cannot deliver,\" said Deloitte\'s captain . \".
A 2011 study by PricewaterhouseCoopers, from more than 100 aerospace suppliers, found that 20% of suppliers are at high risk of not being able to keep up with production growth and are relatively weak in financial strength.
Scott Thompson, PwC\'s head of American operations, said the pressure has grown since then. S.
Aerospace and defense.
Suppliers of goods such as GM nameplates are most likely to lose to competitors because they face the most competitors.
The biggest risks facing Boeing and Airbus come from \"Exclusive-
Thompson said that it is possible to cause trouble to aircraft manufacturers due to any mistakes.
Because Aerospace is relatively small compared with automobiles,
Supplier arrangement.
\"This is definitely a risk,\" Thompson said . \".
\"You have a problem with a supplier.
It does have a significant impact on the supply chain.
Even Boeing is struggling to keep up.
Its 787 factories in South Carolina failed to complete the fuselage part on time.
To ease the bottleneck, the company is hiring contract workers and sending unfinished parts to its large factory in Washington.
Consultant Dave bend has seen the pressure before. In the mid-
2000 he served as vice president at GDX Automotive, a major supplier of rubber window seals for Detroit automakers.
At that time, one of the big three threatened to put the GDX \"no.
Bid \"list unless the price is reduced.
\"I don\'t care if I let you go bankrupt,\" Bender recalls . \"
Many suppliers did close down, he said.
GDX was eventually acquired by a larger company.
Ten years later, as president of Crane company Crane Aerospace & Electronics, he saw something similar from the aircraft manufacturer (CR. N)
Headquartered in the Seattle area, there are about 2,300 employees.
Bender said his team sometimes resisted price cuts for products designed by cranes because it was difficult for aircraft manufacturers to find other suppliers.
If the crane is reduced in price, it requires bidding for other work in exchange conditions.
Allowed by Boeing.
\"This puts pricing pressure on people now and gives us a chance to get in,\" Bender said . \".
But when their contract is signed, Boeing and Airbus will make the crane compete with other companies in price.
\"They were very sharp about it,\" said Bender, who left Crane last year.
\"They may end up giving you the business, but they will let your price drop.
Boeing also asked Crane to pay royalties on replacement parts it sold.
Bender said: \"They know that some suppliers have made very good profits in their after-sales market business, so they are trying to make profits.
Boeing says royalties on products that use its intellectual property rights help it \"recover part of our R & D value \".
Boeing is increasingly asking suppliers to do design work, which requires a significant investment in engineers and time.
In this new model, often referred to as \"paid games\", it may take a few months for suppliers to wait to get revenue from their investments.
If aircraft such as the Boeing 787 and Airbus A380 are delayed, it could be delayed for several years.
Some people have a hard time getting these contracts paid off.
Spirit Aviation Systems Holdings LimitedSPR. N)
Boeing and Airbus, which make 737 bodies and many other parts, recently said they lost $0. 385 billion in costs associated with 787.
This leap cannot be achieved by others.
Paul Van Metre and his partner at a machinery store in Bellingham, Washington, said they couldn\'t stand borrowing more money to expand and bid for more complex jobs for Boeing.
So a few weeks ago, they sold their own company, Pro CNC, to TruLife, an Irish company that makes artificial limbs and wants to diversify.
\"We don\'t have resources and don\'t want to provide personal guarantees on more machines,\" Van Metre said . \".
Pro CNC sales is one of the increasing number of acquisitions by aerospace suppliers.
The huge demand for jets has made suppliers attractive targets for big companies looking to lock in capacity and skilled workers.
Schiller of Cascadia said that many owners, especially those in Washington, are about to retire, have no cash, and have no personal desire to invest and develop.
He has just signed two companies and they are looking for a sale for that reason.
The pre-sale price of the company is eight to ten times the original
He said spending income was almost double that of two years ago.
In this environment, he said, the price and investment pressures of Boeing and Airbus \"are the catalyst for them to say \'we will check out.
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