Defense/Aerospace Industries

[DewDiligence]

Boeing Plays Down Latest Dreamliner Flaw

http://online.wsj.com/article/SB125029235748333397.html

›AUGUST 15, 2009
By PETER SANDERS

On June 23, Boeing Co. executives confronted two problems with the much-anticipated but troubled 787 Dreamliner jet development program. One, involving problems where the plane's wings join the body, Boeing announced, drawing world-wide attention. The other, involving a problem on the 787's composite fuselage, the company kept silent about.

When news of the second problem surfaced late Thursday on an Internet blog that follows the aviation industry, it raised new questions about Boeing's public disclosure policies on the 787 program, which is the Chicago-based aerospace giant's most important development project.

Boeing on Thursday night confirmed that it had ordered some work stopped in late June at an Italian factory. Weaknesses identified on two areas of the fuselage barrels produced at the factory could cause significant damage if they weren't repaired, the company found.

Boeing and its Italian subcontractor, Finmeccanica SpA's Alenia Aeronautica, said the problem is relatively minor, and a fix is already under way. "This has in no way affected the Dreamliner's first flight or the plane's production time or costs," Giovanni Bertolone, Alenia Aeronautica's chief executive, said in an interview Friday.

Boeing officials say they have followed the legal and financial requirements for disclosing information about the 787 program. Lori Gunter, a Boeing spokeswoman, defended the company's decision not to announce the fuselage problem in June. "This is fairly normal for a new development program. These issues come up and we deal with them and move on," she said.

A person familiar with Boeing's operations said stoppage orders like the one that occurred at the Italian plant happen often and usually involve minor matters.

They represent "a daily, common occurrence at major companies," this person said. But the Italian situation "was not a safety issue [and] not a flight issue," making prompt disclosure unnecessary.

Boeing's stock price has been sensitive to developments in the 787 program [no kidding]. On Friday, Boeing shares fell $1.75, or 3.8%, to $44.87 in 4 p.m. composite trading on the New York Stock Exchange.

Nearly two years of delays on the Dreamliner program have put investors and customers on high alert.

A week before Boeing disclosed in June that it was again delaying flight tests and 787 deliveries, Boeing executives said at the Paris Air Show that the plane was on track to make its maiden flight by end of June.

In the weeks following, including on the company's July 22 quarterly earnings call, the company made no mention of the Alenia factory problem.‹