Boeing ‘opens the gates’

Press, 24 January 1986, Page 18

Boeing ‘opens the gates’

From

WILLIAM SCOBIE

in Seattle

j There is a Klondike gleam these days in the eyes of Japanese businessmen visiting .Seattle, capital of the commercial aero-

plane world. It has been lit by word that one of the last unassailed bastions of United States industry has bowed to the inevitable. Raher than fight, it is opening its gates to. the invaders.

! Aircraft manufacturing is one of the very few main industries still dominated by the United States, but Boeing, the world’s leading builder of commercial jets, is going into business with Japan, which has no air industry to speak of, and has long sought a slice of the aerospace pie. i Already a Japanese consortium is learning the ropes, making parts for the 767. Now, negotiations are under way for joint development of Boeing’s next big plane, a multi-billion dollar project called the 7J7 (no prize for guessing what “J” stands for), with a radically new untried engine known as a propfan. Britain’s Rolls Royce will be competing with General Electric and Pratt and Whitney to supply propfans for the all-new hi-tech IJ7 which Boeing is billing as the "Airliner of the 19905.”

It is a huge gamble, but the

new international strategy is part of a general shake-up at Boeing’s headquarters and plant. By year’s end the company, which builds six out of every 10 jetliners expects to have a new chief executive. And it plans to expand through acquisition, something it has not tried since the 19605.

Last month, it snapped up De Havillatid Aircraft, a Canadian Government-owned maker of commuter planes. Earlier, it narrowly failed in a $9.7 billion bid to acquire Hughes Aircraft a purchase that would have made the company a powerful force in electronics and space. The new moves at Boeing, which has annual sales of $26 billion, are a sign not of any internal unease, but of serene confidence — sceptics say overconfidence. Boeing has rarely had it so good. Sales are booming as airlines start ordering planes again after a long hiatus. But, in developing the 150-seat 7J7, the three Japanese companies (Kawasaki, Mitsubishi, and Fuji) forming the consortium

will gain unprecedented inside knowledge of the manufacturing and marketing techinques that have made Boeing the giant of the industry. “They’ll learn everything they need to build their own airliners and crash the world market as they’ve done in cars, cameras, and everything else,” says a Rand “think-tank” analyst. “The Japanese may say they have no intention of doing that, but check again in 1992.” However, Boeing’s chairman, T. R. Wilson, argues that the cost of developing this new plane is simply too great — at more than $8 billion — to be borne alone. What better allies than the industrious Japanese? They are offering to take on 25 per cent of the final cost, and bring all their electronic expertise (not a Boeing strongpoint) to the 7J7, on which (among scores of revolutionary features) signals will be carried by optical fibres instead of conventional electrical wiring.

“Naturally we’re concerned about Japan’s future plans,” says

the Boeing president, Frank Shrontz. “We’re not naive.” Even; so, the danger of the Japanese once again copying and bettering American models pales, for Boeing chiefs, before the certainty; that “if we don’t work with them, a rival will.” The most likely; rival would be the European Airbus consortium, whose 150seater A 320 jet, due to go into production by 1988, is certain to; hurt Boeing sales. -■ The Japanese group contacted Airbus and Boeing’s chief United States competitor, McDonnell Douglas, with joint venture proposals in 1983. “After that there wasn’t any debate about whether we should open up to the Japanese,” says a Boeing executive. “The only problem was how far we should go.” Wilson and Shrontz decided to go “all the way.”

Competitors sniff at the 7J7 as “still a paper aeroplane,” and say the multi-billion dollar propfan’s problems, cannot be overcome by 1992.

“That’s standard, industry bitchery,” says a top Boeing executive. “This joint venture is going to happen.” Copyright — London Observer Service.