Dispute with Supplier Causes Key Component Supply Cutoff; Boeing Company (BA.US) 777 Freighter Reportedly Halted for Nearly Two Months

According to Boeing Company (BA.US) employees and court documents, a dispute between Boeing Company and a small Florida-based supplier has stalled production of Boeing Company's 777 freighter for nearly two months and disrupted production of the 767 program, including freighters and the KC-46 aerial refueling tanker. According to a copy of the complaint, Boeing Company filed suit in August, alleging that supplier Vaero stopped delivering a key wing component, the trailing-edge rib kit, bringing wing production at its Everett, Washington, plant to a halt. The plant supports the 777 freighter and 767 programs. The complaint says the disruption is costing Boeing Company as much as $6.5 million per day. Boeing Company said in the complaint that the trailing-edge rib kit is an "indispensable" component and that Vaero is the sole supplier of the part. According to three Boeing Company employees familiar with the matter, although the two companies reached a settlement in late September, 777 freighter production has still not resumed. The people said the dispute also disrupted production of the 767, a widebody cargo and military aircraft. One of the employees said Boeing Company has received some parts for the 767 line since the settlement. The prolonged disruption underscores the fragility of the aerospace supply chain and shows that a dispute involving a single supplier can halt production of aircraft that remain in strong demand. In addition, according to two people familiar with the matter, Boeing Company is trying to move production of the trailing-edge rib kit in-house. The part is used in wing assembly for the 767 and the current 777 freighter. The Boeing Company 777X, which uses composite wings, was not affected. One Boeing Company employee said that because of the lack of parts supplied by Vaero, Boeing Company has moved two 777 freighters in partial assembly off the final assembly line. Boeing Company data show that so far this year, Boeing Company has delivered 21 777 freighters. According to two Boeing Company employees, a small number of additional freighters had their wings completed before the dispute, so they may still be delivered before the end of the year.