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UPDATE 1-Mitsubishi proposes to build 777X wings in Japan-source

Tim Kelly and Kentaro Sugiyama
Tuesday, 12 Nov 2013 | 11:24 AM ET

* Possible Plan B emerges on eve of Seattle union vote

* Japan co would build 777X wings next to 787 plant-source

* Proposes to build five ships to ferry wings to US-source

* Boeing says would consider Japan if workers reject deal

TOKYO, Nov 12 (Reuters) - Mitsubishi Heavy has suggested a cost-saving way to build the wings of Boeing Co's newest jet in Japan that could offer the planemaker a "Plan B" should its own workers reject a labour deal, a person with knowledge of the proposal said.

Details of the unsolicited proposal emerged on the eve of a crucial vote by 31,000 Boeing workers on a contract that may determine whether the 777X is built in Washington state, the home of nearly all Boeing's commercial jet manufacturing.

Boeing has said that if its machinists reject a proposed eight-year pact it will open talks on alternative locations for the assembly of the jet's fuselage and wings.

With Seattle-area workers given a first chance to vote on plans for a new jetliner, discussions between Boeing and other potential partners have not yet started and no concrete offer is on the table, several people close to the process said.

But Mitsubishi Heavy Industries Ltd, which already makes wings for the 787 Dreamliner, has outlined to Boeing in detail how a new plant could be built alongside its existing 787 wing fabrication facility in the port city of Nagoya, the person told Reuters.

It has also presented a detailed blueprint that sets out significant cost savings by transforming the way in which the advanced carbon-composite wing panels are transported.

According to the person with knowledge of the plan, Mitsubishi has proposed building a fleet of five "Roll On-Roll Off" cargo ships capable of transporting sections of the 777X wing, which would be the longest ever on a U.S.-built jetliner.

This would be cheaper than the current system of outsized "Dreamlifter" aircraft used to transport 787 wing panels, the source said.

Compared with the cost and lead times needed for transport planes, the source said the new maritime freight network could be up and running relatively quickly. Boeing's European rival Airbus also runs a shipping network for plane parts.

Further potential savings would come from the consolidation of some of the 787 and 777X wing work at the adjacent Japanese sites, the source said.

"It is a detailed and carefully thought-through proposal that builds on the current 787 wing manufacturing system," the person said.

Mitsubishi and Boeing both declined to comment.

WAITING FOR BOEING DECISION

Two sources in Tokyo with knowledge of Mitsubishi Heavy's aerospace business said no concrete proposal had been made to Boeing and no discussion was underway on 777X building carbon-composite wings in Japan.

"It is a blank sheet," said one of the sources on condition he wasn't identified.

Both, however, said Mitsubishi, which along with other Japanese suppliers builds 36 percent of the 787 and 21 percent of the 777, would be interested in the new jet's wings.

"Of course we want to proceed with the 777X ... We want to proceed if at all possible, but we're not yet in a position of having heard what the other side (Boeing) intends," one source familiar with the company's position said.

Boeing's main Japanese partner however sees its chance of winning the wing work as poor, expecting the machinists' union to agree to Boeing's package, another source noted.

Rather than win the one-third share that Mitsubishi won for the 787, its goal instead is for about 20 percent of the 777X, roughly in line with the original 777, he said.

A Boeing executive said earlier the company hoped its key machinist union would vote for the contract to secure production of the 777X in Washington state, but would look at alternatives including Japan if the deal were rejected.

"We are hopeful," Chief Technology Officer John Tracy said during a news briefing in Tokyo with executives from suppliers including Mitsubishi Heavy, Kawasaki Heavy Industries Ltd and Fuji Heavy Industries Ltd. Japanese companies build 36 percent of the 787 Dreamliner including the wings.

"If not ratified we will consider all other alternatives," Tracy said, adding that included putting 777X wing work in Japan.

News of an existing proposal, which was handed to Boeing several weeks ago, could raise the temperature of Wednesday's vote, with many workers vowing to reject Boeing's offer.

Frank Larkin, national spokesman for the International Association of Machinists, said the union was not aware of the Mitsubishi proposal.

He declined to speculate on how it might affect the voting and said Boeing had pledged not to consider alternatives until after IAM members had had a chance to vote.

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