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Boeing 777 to be built where it makes 'most sense'

Tuesday, 19 Nov 2013 | 2:07 PM ET
Boeing will build 777 where it makes 'most sense'
Monday, 18 Nov 2013 | 1:35 AM ET
Boeing International President Shephard W. Hill says the company is still looking at building the 777 in the U.S. but is open to other options.

Amid a $95 billion sale of Boeing 777s announced at the Dubai Airshow this week—the biggest combined order in the manufacturer's history—questions are being asked about where the airliner will be built.

Speaking to CNBC at the show, Boeing International President Shephard Hill said the company would build the 777 "where it makes most sense."

Boeing announced orders for 150 of the planes from Emirates, 50 from Qatar Airways and 25 from Etihad Airways. German carrier Lufthansa has ordered 34. What received less attention at the show is that Boeing also signed a new deal with the aerospace unit of Abu Dhabi-based Mubadala to supply some $2.5 billion in advanced composites and machine metals for the craft.

Boeing orders logical: Analyst
Howard Rubel, aerospace and defense analyst at Jefferies & Co., weighs in on record orders for the 777 at the Dubai Airshow.

An ongoing labor union dispute in Washington state has exacerbated talk about producing the plane elsewhere.The International Association of Machinists and Aerospace Workers rejected a proposal by Boeing that would have ensured a contract extension for workers in the Puget Sound to 2024 from 2016, in return for fewer benefits and slower wage increases for new employees.

Asked if adding a base in the Gulf would be an option, Hill indicated that nothing was off the table, saying, "Anything that is competitive would be a consideration."

"Honestly, we're looking within the United States at this point because of the large infrastructure we have there," Hill said. "But again, with the mandate to do it on time, to do it in a quality way, that will drive the decision."

Although unlikely, setting up an additional camp in the oil-rich Gulf would make sense in terms of proximity to customers. Emirates was involved in the design process of the 777X, the development-stage code name for the 777.

An employee works on the nose of a Boeing Co. 777 airplane at the company's facility in Everett, Washington.
Mike Kane | Bloomberg | Getty Images
An employee works on the nose of a Boeing Co. 777 airplane at the company's facility in Everett, Washington.

Many producers of 777 components also are outside the United States, and the increasingly complex nature of new designs has only accelerated that trend. The 787 Dreamliner became a World Bank case study in itself, showcasing a "fragmentation of production."

Some of the heaviest components of the aircraft, such as the engine, are built in the United States. But the central fuselage is made in Italy; the landing gear comes from France; the cargo doors are manufactured in Sweden, and the raked wings are from South Korea. Final assembly is done in the United States.

That splintered manufacturing process has had its critics, who point to repeated delays, higher costs and reliability issues. The Dreamliner was plagued by production delays for the better part of six years.

Boeing CEO Jim McNerney told reporters in Dubai that specific plans for manufacturing the new version of the 777 would be disclosed in two to three months.


—By CNBC's Yousef Gamal El-Din

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