Since I was a Governmental
Auditor and Audit Supervisor for a near 20 years, and they always say write
about what you know. I will do just that, write about this impending Boeing/FAA
audit at Charleston. Please note that Boeing has a plethora of problems ongoing
at Charleston. It is "rumored that mid stage of the assembly process is a
disaster. It is also rumored that assembly staff are not able to get its arms
around the 787 in a sufficient manner. Even though they can eventually produce
a 787 at the end of the day or year, they have much to account for in that
assembly process. The FAA is going in as if it were shooting fish in the
barrel and then reporting they killed its limit.
Performance
Audit Chapter 1:
Here is
my take on this seven day audit? Seven days, are you kidding me, or what? 80
Auditors all dressed in, well, auditor garb. Seven days to collect the
facts from testing processes and systems and documentation that Boeing produces
787's. Seven days to interact with executives, 300 or more extras hired to
assist the auditors from Boeing personnel. Egad, this sounds like a performance
audit that targets a few areas under suspicion for problematic reporting, and
aviation compliance. The FAA knows what it wants, and they have brought in the
swat team of auditors and are kicking the doors down in Charleston, SC.
Boeing please spin it as you will, but the FAA knows the answer before they ask the questions. The audit tests they are conducting are just validation of what they believe are happening on the factory floor. Even though Boeing is producing presumably safe 787's, they want to mop up the floor of those Boeing Keystone Cops blowing the whistles on the floor. Because great assembly units are colliding in the factory and misplaced tools are ending up in the wrong sections of the factory, the FAA wants to know how a respected organization as Boeing, organizes the factory in this slapstick comedy of errors, before a 787 test flies around Charleston, SC.
Boeing please spin it as you will, but the FAA knows the answer before they ask the questions. The audit tests they are conducting are just validation of what they believe are happening on the factory floor. Even though Boeing is producing presumably safe 787's, they want to mop up the floor of those Boeing Keystone Cops blowing the whistles on the floor. Because great assembly units are colliding in the factory and misplaced tools are ending up in the wrong sections of the factory, the FAA wants to know how a respected organization as Boeing, organizes the factory in this slapstick comedy of errors, before a 787 test flies around Charleston, SC.
The FAA
senses, or more importantly fears that Boeing has trouble in Charleston where
Boeing is getting this thing put together in a concise fashion. This audit is
to prove and validate the building process and the voracity of Boeing's
documents. With 80 auditors, seven days and 300 new Boeing audit specific
employees, I sense trouble in the findings and recommendations. Boeing
has looked up the words "we concur" in the Boeing business thesaurus
and do not like that suggested meaning. It’s tantamount to falling on the
sward and saying "we bad", sorry.
Audit
test come in a variety of forms all seeking if a condition may be true or
false. The audit team already have test constructed from pre audit information
that suggest a problematic and common occurrence. Failures are hoped to be
found and reported in findings validated per pre audit plan. Example:... it
takes double the time to place a 787 on the flight line than what it does in
Everett. That means something smells in Denmark and the audit team will find
that answer somewhere in the competency level of the work process. A "we
concur" answer comes on the audit response, means somebody gets fired
at Boeing. Who, it is depends how long the audit footnotes are.
Findings:
If it’s a
twenty word finding, against Boeing no one gets fired but remedial action is
taken. If it’s a one page finding with an addendum, charts, and grafts or
additional examples supporting the finding somebody gets fired. Maybe a
vice president change is coming in Charleston. A sacrifice, if you will to the
FAA God’s.
Recommendations:
Or better
stated as reprimands from the FAA, are the necessary statements leading to the
"we concur" (where in Boeing's case it had not supplied to date). The FAA
recommends: "that Boeing get its act together in Charleston and fire the keystone
cops as starters". Ahum, "We Concur".
Audit
Response written by the Boeing legal team:
A ceremonial falling on the sward
event kept in private. "After review of FAA Findings and Recommendations,
Boeing has completed items 1-12 and installed a systematic process preventing error
events from never happening again. These safeguards, guarantee that all
instances cited by the audit findings, summarized in its recommendation will
adhere to a strict compliance of the audit recommendation, and have already
installed recommendations in the production environment addressing every
finding."
Say what,
never mind, it just works trust me?
The FAA will respond by: 'We will follow-up with another audit on a periodic basis insuring
Boeing means what is says and says what it means audit format." Otherwise, known
as a compliance audit.
Audits
always pass in time, I know, I'm retired.
Go back to the mid-late 1990s, and Airbus and Boeing reached opposite decisions about whether it was worth putting several billions into developing a 747 successor. Boeing opted for a relatively cheap rewinging and upgrade to produce the 747-8 and Airbus went for the 380. Boeing reckoned on a market of around 700 aircraft by 2030, Airbus reckoned 1700+. By 2006, market estimates by independent experts were in the 400-800 range.
Developing the A380 cost about €11Bn. It's at 259 orders, some 8 1/2 years after it's first flight. It's never yet hit the production rates that were forecast when the programme was launched, and by next year, it looks like Airbus will be having to build "white-tail" aircraft - i.e. built in advance of orders.
The original breakeven point (i.e. recovering development and production costs) was supposed to be 270 aircraft, but as development was delayed and the dollar:euro exchange rate fell, that rose and when anyone last made an announcement it was north of 400 units - that was in 2006.
Things have got worse since then. Sales and production have both been slower, there have been fixes needed to things like wing cracks, and production costs have risen. It's also probable that there's been much heavier discounting of aircraft than originally anticipated, as Airbus needs to fill production slots. there have been claims of discounts as high as 40% against list price.
Airbus is now only saying that the aircraft will break even on a unit basis (i.e the sales price will be higher than the production cost) in about 2015 (based on comments in 2010). Every aircraft delivered until then will have made a loss for Airbus. Note that it's only AFTER unit breakeven that any contribution is made to recover development and finance costs.
There have been 61 net orders over the last five years - a rate of 12/year. The delivery rate is about 20-25/year (and was originally supposed to be 30+)
They've been utterly quiet on when programme breakeven will happen for several years now. On a reasonable commercial guess, allowing for Airbus carrying the €11bn development cost on the books, plus delivering over 100 aircraft at a loss, plus the fact that Emirates has them by the balls and will be driving a VERY hard bargain for the aircraft they're taking, that breakeven point will have now to be well above the 400 forecast in 2006 - doing some crude numbers, and assuming the white-tails at best break even, I suspect north of 600 units.
Oh, and of the aircraft currently on order, 30 are for an airline in receivership - "Kingfisher" of India.
Sooner or later, Airbus is going to have to take a huge write-down on the development cost of the A380. Which is going to mean that the French, German, UK and other governments will lose all of their launch-aid loans.
It's a hellish impressive pain - but it's looking like a commercial disaster." End Quote
Exactly my friend!