INSIGHT-As Boeing, Airbus factories hum, suppliers get rattled
By Alwyn Scott
NEW YORK, March 3,(Reuters) - The world's largest plane makers are soaring these days, fueled by historic demand for new jets that has cranked up their factories to record speeds.
But booming sales of aircraft, far from being a bonanza for suppliers, are spurring brutal competition between Airbus Group NV and Boeing Co, which are demanding better deals from the companies that make billions of parts the factories need.
GM Nameplate is one such company. The 400-employee Seattle firm makes the signs and placards posted on everything from overhead bins to emergency exits: about 1,500 signs per plane, or 1.6 million a year to Boeing alone.
As Boeing sped up jet output by 40 percent over the last three years, it not only asked GM Nameplate to turn out more signs. It also wanted a 15 to 20 percent price cut, said Paul Michaels, director of GMN Aerospace, the aircraft division.
"That's huge," Michaels said.
Boeing also wanted GMN to show it was able to meet faster production speeds, and that it had the financial health to stay in business. The company spent a week with two Boeing coaches going over its factory. Michaels says he now expects to hit the price target in 2016 and ultimately to be better off. But "it was very nerve-racking at first."
The price pressure has left many small-tier suppliers grappling with whether to invest and grow, sell to big players or simply fold.
"It's forcing suppliers to say either I'm in the game or out of the game," said Christian Schiller, managing director at Cascadia Capital, a Seattle investment bank. "They can't just stay still." Continued...