As we were
just saying, when it comes to Boeing Co.'s (NYSE:BA) distributed supply chain model, you have to look past the bumps and the bottlenecks and consider the business reasons for building airplanes this way. President Obama's
trip to Russia this week accompanied by execs from several major U.S. companies, including Boeing, reminds us why.
On Tuesday Boeing will announce a 50-50
joint venture with Russia's VSMPO-Avisma, the world's largest titanium producer, Reuters reports. The venture will produce $700 million to $900 million in titanium parts for the 787 Dreamliner, which has been troubled by delays attributed partly to the distributed supply chain model.
As is usually the case with these scripted announcements, the relationship between Boeing and VSMPO-Avisma is not new. In a 2007 Reuters story, we find the two sides
announcing a JV that sounds like this one. Perhaps on Tuesday we'll find out if this is an expansion of that deal, its closing or something else.
In any event, it's clear that Boeing's reasons for staying engaged in Russia go beyond the titanium. In the long-term market projections on its Web site, it predicts that Russia and Central Asia will take delivery of 1,050 airplanes in the next 20 years. Boeing's market share in the region, it notes, has grown to 24% from 4% in 2000.
Will its share keep growing? The goodwill of state-controlled VSMPO-Avisma (which also supplies Airbus SAS) couldn't hurt. -
Kenneth Klee
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Juergen Lasowski
And the winners are...
Boeing has yet to learn at great cost that it is almost impossible to establish a profitable supply chain based on an outdated measuring system that most of its partners have discarded long ago.