Plane makers squeeze suppliers as sales soar

Thu Jun 20, 2013 2:39pm EDT
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By Alwyn Scott

PARIS (Reuters) - It should be a bonanza for suppliers: $135 billion in new orders booked by Boeing (BA.N: Quote) and Airbus EAD.PA at the Paris Airshow this week.

Yet companies that make everything from overhead bins to cockpit controls are under mounting pressure to cut prices.

One such company is Renton Coil Spring, which has products on the biggest world's jetliner, the Airbus A380, on Boeing's jets and even fighter aircraft including the F16.

Boeing and others are asking it to make production more efficient and to share the savings in a growing "pay-to-play" system, said Charles Pepka, CEO of the company based in Renton, Washington.

Partnering for Success is what Boeing CEO Jim McNerney calls it - a way for Boeing to help suppliers to install the same lean-manufacturing techniques Boeing is using to improve quality and speed at its own factories.

From Boeing's point of view, this helps suppliers to cut costs, and Boeing simply wants to share the gains.

But the hit to profit margin leaves suppliers bristling.

"It's like a game of poker," said Pepka. "You have to figure out if they want 15 percent or will be OK with 0.1 percent."   Continued...

The vertical stabilizer of a Boeing 787 Dreamliner is seen as an Airbus A380, the world's largest jetliner, takes off during the 49th Paris Air Show at the Le Bourget airport near Paris in this June 23, 2011, file photo. REUTERS/Gonzalo Fuentes/Files