APPENDIX 6
Memorandum by The Boeing Company
The Boeing Company would like to contribute
to the Trade and Industry Select Committee's inquiry into the
competitiveness of the UK aerospace industry. As such we have
enclosed our written submission, based on the terms of reference,
to help with your investigation.
As the largest aerospace and defence company
in the world, Boeing is acutely interested in the competitiveness
of the UK aerospace industry and the specific issues raised by
the terms of reference. The following information demonstrates
our strong support for a highly competitive business environment
in the UK, our support for the innovation that this engenders
and for the opportunity to operate in a fair and open market system.
The reasoning for this support is based on two
pillars. First, as Boeing is a significant customer of the UK
aerospace industry, purchasing some £1.6 billion annually
from British businesses, it has an unparalleled stake in supporting
competitiveness across the sector. Second, our company is a major
investor in Research and Development in this country, and has
also established a number of important industrial partnerships.
Our commitment to the British Aerospace sector is deep and long
lasting.
M R H Jenkins
24 November 2004
INTRODUCTION
1. With a heritage that mirrors the first
100 years of flight, Boeing provides products and services to
customers in 145 countries. Boeing has been the premier manufacturer
of commercial jetliners for more than 40 years and is a global
market leader in military aircraft, satellites, missile defence,
human space flight, and launch systems and services.
2. Boeing employs nearly 156,000 people
in 70 countries. The Society of British Aerospace Companies estimates
that in the UK Boeing supports directly or indirectly some 30,000
jobs, making it a major stakeholder in the national economy and
making Britain one of the most important countries in which the
company operates. With a history in pioneering safer, faster and
better flight, Boeing is committed to working for a competitive
aerospace industry that continues to develop cutting edge innovation
and operational efficiency.
3. Boeing is organised into two major business
units: Boeing Commercial Airplanes and Integrated Defence Systems.
There are two further important business units, Connexion by Boeing
and Boeing Capital Corporation. Boeing's Integrated Defense Systems
provides end-to-end services for large-scale systems that combine
sophisticated communications networks with air, land, sea and
space-based platforms for global military, government and commercial
customers. The Commercial Airplanes part of the company is well
known for its 717, 737, 747, 767 and 777 families of aeroplanes,
and the Boeing Business Jet. New product development efforts are
focused on the Boeing 7E7, a super-efficient aeroplane that is
expected to be in commercial service in 2008.
4. Boeing is happy for all or any part of
this submission to be reproduced or published subject to written
approval by the company or its representatives.
Term of Reference:
"the importance of the UK aerospace industry
to the UK economy;"
Boeing Response:
THE UK AEROSPACE
MANUFACTURING FOOTPRINT
5. Boeing shares the assessment of the Department
for Trade and Industry that the UK aerospace industry is an important
part of the UK economy with its turnover of £18 billion per
annum. The exceptional engineering expertise, the range of aerospace
product offerings, and the breadth of sector specialist companies
make the UK an international centre-of-excellence for aviation
services and equipment.
6. The importance of the aerospace industry
to the UK economy can also be seen from the long and proud relationship
Boeing has with Britain, that stretches back more than 40 years.
Boeing purchases an average of £1.6 billion of equipment
and services every year from the UK, supporting some 30,000 jobs
across more than 240 companies. Boeing enjoys a number of important
partnerships, most notably with BAE Systems, GKN, Rolls-Royce,
Messier-Dowty, Cobham and Smiths. These partnerships have been
built up over many years.
7. The success of the relationships and
the world-class quality of work from British companies have meant
that Boeing's new aircraft, the 7E7 Dreamliner, will see key components
manufactured by British based firms. Messier-Dowty will be providing
the landing gear; an important element of the fuel system is coming
from Cobham; Smiths is developing and producing the core computing
system and actuation systems; and Rolls-Royce has been chosen
as one of two engine partners.
Term of Reference:
"Its industrial performance in the current
economic climate;"
Boeing Response:
POST 9/11
8. Following a downturn in the wake of the
terrorist attacks of 11 September 2001, there are now clear indications
of recovery in the civil aerospace sector. The major low cost
carriers serving the UK (Easyjet, Ryanair, BMIBaby, Flybe and
FlyGlobespan) are all pursuing active expansion plans, adding
UK hubs, increasing routes and expanding their networks. The major
carriers have seen long haul traffic levels finally return to
pre-September 2001 levels. Interest in the next generation Boeing
airplane, the 7E7 is very high and given the number of aerospace
companies in the UK who will participate in this programme this
bodes well for the overall economic climate.
THE IMPACT
OF GLOBALISATION
9. In an age dominated by global interaction,
the performance of Britain's aerospace industry not only depends
on the economic climate in the UK but on the condition and competitiveness
of the industry at large. Britain has proven itself to be one
of the most successful locations for aerospace engineering, design
and manufacture in the world. For the UK to maintain this prominent
position, Britain will have to continue to invest in this sector
and British governments will need to place support for Research
and Development (R&D) high on their future agendas. Boeing
itself firmly recognises the importance of R&D in this country,
and has led private sector investment into academic partnerships,
amongst others, to further the course of innovation, research
and product development. A leading example of this in the UK is
the Advanced Manufacturing and Research Centre (AMRC) which began
as a joint venture between the University of Sheffield and Boeing
and has since attracted significant investment and endorsement
from various public bodies, together with a long list of major
private sector aerospace companies (see paragraphs 14-19 below).
Term of Reference:
"The challenges faced by the sector in
domestic and international markets, including barriers to trade;"
Boeing Response:
FREE TRADE
AREAS
10. Boeing operates in almost every country
in the world. The company sources parts for its aerospace products
and services from around the globe. As a global enterprise, Boeing
supports minimal barriers to trade in order to maximise competitiveness
in terms of costs and of the promotion of the most innovative
products and services available. In developing an optimal market
system, Boeing supports common and free access to information
as required, and the conduct of business as laid out in the Boeing
company's own code of practice as well as in the Department for
Trade and Industry's toolkit for best practice.
SUPPORTING INNOVATION
11. With the future of aerospace driven
by developments in technology, this is also one of the core challenges
that the sector faces domestically and internationally. Through
wide public sector partnerships, Boeing is involved in supporting
innovation in the UK and investing in a sustainable future.
BOEING'S
COMMITMENT TO
ENVIRONMENTAL GOALS
12. A core responsibility of every major
multinational is to recognise its role as a stakeholder in the
environment, as well as the environmental impact resulting from
its activities. This applies not least to the aerospace sector.
Moreover, Boeing attaches particular importance to its role as
a corporate citizen. We are committed to building long term relationships
in the communities in which the company operates. One example
of this is the on-going involvement of Boeing with the Prince's
Trust in South Yorkshire.
Term of Reference:
"Investment in research and technology;"
Boeing Response:
INDUSTRY-ACADEMIC
RESEARCH
13. Boeing is investing in multi-year research
and technology programmes with the University of Cambridge, the
Cranfield University and the University of Sheffield. These partnerships
are designed to stimulate innovation, to obtain access to the
best technology and research talent, and to exploit resources
for long lasting mutual benefit. In Cambridge, we have an agreement
to conduct R&D in the area of information technology. Cambridge
is a recognised leader in IT research, and its work in such areas
as automated reasoning, intelligent systems, natural language
and information processing, information manipulation and information
security are of particular interest to Boeing. With Cranfield
University, Boeing is working on a variety of projects that reflect
this university's reputation and expertise in the areas of aviation,
aeronautics and aircraft development. One is the design and production
of a sub-scale (21-foot wingspan) demonstrator of a Blended Wing
Body aircraft, which is being developed by Cranfield's wholly
owned commercial subsidiary, Cranfield Aerospace Ltd.
THE AMRC
14. In this changing aerospace business
environment, research ventures such as the AMRC (see paragraph
9 above), have a major role to play in developing new, improved
manufacturing methods together with benchmarking and transferring
good practice and knowledge through the supply chain. In particular,
they have a role to support UK companies to meet the cost and
productivity targets demanded.
15. The AMRC initially focused on machining
but has developed to have a wider brief carrying out research
into manufacturing technology in general. The centre is also the
catalyst for the development of a 100-acre advanced manufacturing
park, attracting other research centres and high value added manufacturing
companies to the region. Following Boeing's announced support
of the AMRC, it was identified as a University Innovation Centre
in the Government White Paper "Opportunities for All in a
World of Change" published in March 2001 and was awarded
a grant of £5.93 million.
16. In September 2001 the South Yorkshire
Objective 1 Committee awarded the AMRC a grant of £243,800
for initial project work, administrative support and consultancy.
This was followed by a second grant of £2.7 million in June
2004 towards the construction of laboratory facilities and to
support the regeneration of South Yorkshire industry.
17. The AMRC has extensive research facilities,
including "state of the art" industrial sized machine
tools, and it is now recognised as one of the leading centres
of expertise in machining in the world. The AMRC has a unique
method of working with its partners. Research is carried out in
"generic projects" supported by all the industrial partners.
These "generic projects" develop the underpinning techniques
which are commercialised and brought into practice in industrial
case studies. Typical case study projects include the manufacture
of engine casings for Rolls-Royce and the manufacture of under-carriage
components for Messier-Dowty.
18. The Messier-Dowty case study is a good
example of the work carried out at the AMRC. When Boeing announced
the production of the 7E7 commercial aircraft they asked two major
undercarriage manufacturers to quote for the design and manufacture
of the main and nose undercarriage, one from North America and
one (Messier-Dowty) from the UK. To meet the requirements to reduce
weight and hence operating costs the undercarriage was to be manufactured
in titanium 5553, a material not previously used for commercial
undercarriage components.
19. Working with the AMRC, Messier-Dowty
was able to meet the target price requested by Boeing and win
the order to supply both the main and nose undercarriage for the
7E7. This is the first time Messier-Dowty has supplied undercarriage
to Boeing commercial aircraft. Messier-Dowry, and the AMRC were
able to manufacture prototype titanium 5553 components on commercial
machine tools, transition the techniques developed into their
own factory, and provide a competitive bid to beat the supplier
from North America. This is an example of an academic-industry
relationship, which has developed cutting edge technology that
is tailored to suit the needs of business in a highly competitive
industry. It constitutes a win for Messier-Dowty, a win for Boeing,
and a win for UK aerospace.
Term of Reference:
"Progress towards the implementation of
the recommendations of the DTI-sponsored Aerospace Innovation
and Growth Team."
Boeing Response: Sustainable Aviation
20. Boeing has hitherto not been directly
associated with the work of the Aerospace Innovation and Growth
Team (AeIGT), but the company is fully in support of the vision
for 2022 that the team has presented. Boeing believes that its
own plans for growth within the UK are consistent with the goals
of the AeIGT. Below are Boeing's responses to each of the AeIGT's
six recommendations.
1. The UK must have a world-class Aerospace
applied research and demonstration programme, sufficient to maintain
and to enhance Britain's position in the global market.
21. Boeing strongly agrees, and through
its own investments in R&D in this country, as set out in
this memorandum, believes that it is contributing actively to
this objective.
2. UK Industry must systematically and
continuously deliver productivity improvement at a rate faster
than its competitors.
22. In recent years Boeing has focused increasingly
on large systems integration. This has led to a rationalisation
of the supply chain, with major manufacturers participating in
a more responsive and flexible provision of major components for
final assembly. Suppliers are also given overall cost targets,
which must be achieved if they are to be considered as a long
term supply partner.
23. Boeing and its UK suppliers have been
incorporating Lean processes and productivity improvements throughout
the aerospace supply chain. However, to become or remain one of
our Preferred Suppliers, ever more challenging quality and schedule
goals must be met. In the past, a 95% quality rating was allowable
for a Bronze rated supplier, now the quality must be 97% or above.
3. UK Industry must continuously develop
a world-class workforce.
24. Boeing has around 500 employees across
the UK. Moreover, as already stated, Boeing's £1.6 billion
spend on equipment and services every year supports an estimated
30,000 jobs across more than 240 companies located in the UK.
In general, these jobs are highly skilled, qualified and well
paid.
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