Boeing Struggles to Turn Around Troubled Canadian Aircraft Firm
De Havilland Aircraft won’t be profitable again for at least two years, say officials of its parent, Boeing Co.
The commuter airplane manufacturer had been owned by the Canadian government since 1974 and seemed a bargain at the $112-million price paid by Boeing in January, 1986.
Since then, however, Boeing officials say, high production costs at De Havilland have been partly to blame for the parent company’s decline in profits.
“We’ve had some disappointments,” says Boeing Chief Executive Frank Shrontz. “It hasn’t proceeded as we anticipated from day one. It’s a concern.”
Eleven months ago, former Boeing official Ronald B. Woodward was named president of the De Havilland subsidiary.
“We’re going to fix this place,” he said in a recent interview. “This is our last chance to do it. If we fall on our nose again, the customers won’t stay with us.”
11-Week Strike
De Havilland could be profitable again in “two or three years if things go right,” Woodward said.
De Havilland, based in the Toronto suburb of Downsview, builds the 36- to 56-seat, $9.5-million Dash 7 and $8.8-million Dash 8 commuter planes. It has about 30% of the nearly $1.5-billion-a-year world market for commuter aircraft.
Although De Havilland was losing money when it was sold, Boeing officials thought the smaller planes would complement its line of commercial jets.
Instead they got a string of headaches, the biggest being an 11-week strike by 4,100 production and office workers last summer. The company also had to slow down production to improve quality and delivery schedules and because of parts shortages.
“As far as I’m concerned, we’ve had our last strike,” Woodward said. “This place will not be in business in the future with that kind of labor situation.”
Woodward said sales are good and no customers canceled orders because of delivery delays from the strike. “In the last six weeks we sold 25 airplanes,” he said. “That’s darn close to next year’s production total.”
Litany of Problems
Nonetheless, “we’ve never been able to get production to sustain the sales,” he said. While 83 twin-engine Dash 8s have been delivered, the number “could have been 200 or 250. We could have dominated the world market,” he said.
“There is strong demand for the aircraft. It is viewed very well by the customers,” said Tom Appleton, vice president for marketing and sales. “It is frustrating when someone says, ‘I would buy your airplane if you could deliver it tomorrow.’ ”
De Havilland delivered its first post-strike airplane on Nov. 27, and is producing three aircraft a month through next June.
Woodward recites a litany of problems involving parts, management discipline, inventory control, scheduling, planning and “the quality of engineering on the floor.”
De Havilland “just didn’t have the type of discipline we are used to” at Boeing, he said. In addition, under government ownership, “lots of investments weren’t made in people and training,” he asserted.
“We are spending twice as much for labor hours as industry standards,” Woodward said.
De Havilland takes 90,000 worker hours to build an airplane, although 40,000 should be enough, and the 5,400 employees should be able to produce seven planes a month, he said.
“It’s like the organization was working on different airplane schedules,” he said.
The Downsview plant had a number of problems of which Boeing officials were ignorant at the time of purchase, Woodward said. New ventilation systems had to be installed to meet health and safety standards, and an inventory control system was adopted to keep track of parts.
Worker Attitudes
New manufacturing equipment, standard at most aircraft plants, had to be bought, including a computerized machine that cuts stacks of aluminum sheets into parts.
Boeing has spent $25 million “just getting the basic machinery of the plant up to snuff,” Woodward said.
Boeing also is trying to improve worker attitudes. So far, about 1,700 workers have voluntarily gone through a two-hour briefing on how the company can be turned around.
