March 16, 2015 / 2:02 AM / in 2 years

Boeing production czar says planemaker won't repeat errors

A Boeing 737 jetliner is pictured during a tour of the Boeing 737 assembly plant in Renton, Washington February 4, 2014.David Ryder

SEATTLE (Reuters) - Boeing Co (BA.N) is well-positioned to hit record production targets for its popular 737 jetliner by 2018, having learned from past mistakes, the head of its industrial system told Reuters.

"To the extent that we could accommodate uncertainty and risk, or reduce risk, we are much better postured today than when we have tried this in the past," said Pat Shanahan, who oversees production at the world's biggest planemaker.

Boeing's production lines face a crucial test as the company prepares to lift output of its bestselling jet by 24 percent while simultaneously shifting to a new fuel-saving model, the 737 MAX.

Boeing has not attempted such a production boost and model shift since 1997, when it was forced to stop assembly of its 747 jumbo and delay building a new version of the 737 for several weeks due to parts shortages. Boeing was also distracted by a merger with McDonnell-Douglas at the time.

This time, with zero room for error on the 737, a major cash generator for the company, Boeing is taking a fresh look at the way it builds jets by adding more automation.

"When I think about the mistakes we made back then, we didn't have an integrated plan that included the supply chain," Shanahan said, noting that the company now follows such a plan.

Shanahan, 52, is a troubleshooter credited with turning round the 787 Dreamliner in 2008 after delays also blamed on supply chain problems and a missile defense project.

As senior vice president for airplane programs, he must ensure the 737 makeover goes smoothly, and prepare a production system for the larger 777X, a revamped model of the 777 due to enter service in 2020.

Boeing builds 42 medium-haul 737s a month and plans to lift this to 52 by 2018 in competition with Europe's Airbus (AIR.PA).

Industry sources have said Boeing is assessing whether the supply chain can support an increase to 58, but the company says it has nothing to add to its announced target of 52.

Shanahan declined to discuss further 737 output increases, but he is prepared to use bold numbers to illustrate the scale of the industrial challenge posed by the 737, and his belief that innovation is about production systems, not just aircraft design.

"I talk about 100 (737s a month)," he said, adding, "It is not about the number...When we said 10 787s a month nobody could get their head around it. I remember on the 737 program we said one a day. (People said) 'No way!' Now it is two a day."

Other than the pressures of adding a newer 787-9 variant, the 787 supply base is "starting to stabilize," Shanahan said.

"We are doing a lot of (787) -8s and -9s, so we are stressing that part of the system until it gets capable. But nothing is in the abnormal range."

Some in the industry remain concerned that Boeing isn't moving quickly enough in reducing 787 costs and increasing productivity.

The aerospace industry's wider supply chain always flashes 'red' but is broadly coping with faster production, Shanahan said. "For the major elements of the industry it is sound; it is just going through the stress of growth," he added.

One exception is a chronic shortage of seats that affects most plane makers. With so many new types being produced, lead times have risen well above two years. "It drives me crazy," Shanahan said.

Reporting by Tim Hepher and Alwyn Scott; Editing by Christian Plumb and Miral Fahmy

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