C-17 Production Line Out of Time?

Mar 05, 2007 06:58 UTC by Defense Industry Daily staff
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Reinforcements coming?
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In 2006 it appeared that recent purchases by Australia, Canada, Britain, and possibly others would not be enough to sustain C-17 production much beyond 2008, when the end of US orders was scheduled to close the line.

In August 2006, Boeing issued an announcement that it would no longer ‘protect’ 22 C-17s, meaning they’d stop paying partners to produce parts if they weren’t destined for a committed plane order. A September 2006 success by Sen. Jim Talent [R-MO] added more aircraft and extended the production line, and there were also a few international orders. With no further planes requested by the USAF in the FY 2008 budget, however, and international interest seemingly exhausted, Boeing has issued a similar announcement just 7 months later, only to retract it in June 2007 after the House Armed Services Committee submitted an FY 2008 budget with 10 more planes. And the game of chicken continues, even as the C-5′s modernization program’s success remains uncertain, and C-17s are wearing out faster due to higher usage.
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The Long Goodbye

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C-17 Globemaster III
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A recent Flight International article adds further punch by noting that Boeing has committed $100 million to protect deliveries of 22 more C-17s: 7 in 2007 (to add to the USA’s last 8 aircraft) and 15 in 2008. With orders for only 12 non-US aircraft identified, however, Boeing has given the US Air Force until August 18th to commit to additional C-17s or the firm will only ‘protect’ 12 aircraft. This means they would stop paying suppliers to produce parts for the other 10.

Which is what happened on Aug 18/06.

In exchange for putting its money on the line, Boeing had wanted an indication that the USAF will program money for more C-17s into its five-year budget beginning in 2008, with long-lead money to be provided in 2007. That obviously didn’t happen. Hence their August 18, 2006 notice to suppliers:

“For over a year, Boeing spent its own money protecting the C-17 supplier base. This investment was intended to keep the production line viable while the U.S. Government and Boeing pursued international orders, and to allow time for the U.S. Government to update its post-9/11 mobility requirements, if they chose to do so. During that time Boeing received international orders and commitments for more than a dozen of the advanced air lifters. Congress has added funding for up to three more as part of its recent 2007 budget deliberations. However, when the orders are totaled, there are not enough to sustain continued production beyond mid-2009.”

The move lowers Boeing’s costs. If the shut-down is completed, restarting and re-staffing supplier production lines would sharply raise the USAF’s costs for any additional orders, and would extend delivery times if they decide later on that more aircraft are needed due to the C-17 fleet’s heavy usage and the planes’ accelerated rate of wear.

Boeing’s August 17, 2006 release adds that:

“This action will ultimately affect the 5,500 Boeing jobs in California, Missouri, Georgia, and Arizona, directly tied to the C-17, and the program’s nationwide supplier workforce that totals more than 25,000 people. Nearly 700 companies in 42 states provide parts and services that go into each C-17.”

DID’s coverage of a recent US Commerce Department report sheds some light on just how much that could cost (itemized, but it adds up to up to $4.8 billion once the line shuts down fully). Meanwhile, local groups continued to lobby hard and look for ways to cut costs, even as Washington think-tanks are savaged the decision as “The Dumbest Weapons Decision of the Decade.”

There had been some speculation that the Pentagon’s C-17 cuts were a cosmetic exercise, sure to be canceled out by Congress. Bills like Lieberman-Talent offered some hope for the Long Beach, CA facility and its suppliers – a hope fulfilled by the addition of 10 US C-17s to the order books in a $2 billion plus-up. Back in August 2006, DID had written that:

“…there is at least another year before decisions are made that could result in a full line closure. Still, the effects of the Pentagon’s decision on the C-17 program may well turn out to be anything but cosmetic.”

Despite additional orders from the USA (10), NATO (4), Canada (4), Australia (4), and Britain (1), the Boeing C-17 production line is set to expire in FY 2009. The USA’s FY 2008 budget request is $653.5 million, and in the words of a Pentagon document “provides for the removing and shipping of C-17 production tooling/ equipment to off-site storage.”

While Congress will eventually have its own say, Boeing reacted with a March 2, 2007 release that put the C-17 production line back into preparation for shutdown, touting 7,000 jobs attached to C-17 production this time:

“Based on the 34-month lead time necessary to build a C-17, Boeing needed a commitment now to avoid a break in production. The Department of Defense did not request funding for new C-17s in the Fiscal Year 2008 budget, released in early February. Consequently, maintaining the C-17 supply base and production line at current production rates will require funding for up to 16 C-17s when Congress finalizes the FY2008 budget.

Last year, Boeing accepted significant risk and used company resources to fund the supply base and production line for 22 aircraft until mid-August. Boeing took this risk because of significant international customer interest and the Air Force’s designation of additional C-17s as the number one priority on its FY2007 Unfunded Priorities List (UPL). This year, the Department of Defense has not requested funding for new C-17s in the FY2008 defense budget, new international interest is significantly less than it was a year ago and the Air Force has identified only two C-17s on its FY2008 UPL.”

The ball is now in Congress’ court. Adding 14 planes to the budget at a likely cost of $3 billion, however, represents a very substantial leap. With the KC-X aerial tanker RFP underway as the USAF’s top priority, and the effort to re-wire, revamp and re-engine the giant C-5 Galaxys underway, the C-17 is flying into a more competitive procurement environment for FY 2008.

Developments and Updates

C-17: Back to the Future? (August 2006)

YC-15 & F-4
YC-15 and F-4
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Flight International also believes they Boeing will be angling for the potential to use a modified C-17 in 2012, when the USAF plans to begin its AMC-X theater airlifter program to replace the C-130. Since the C-17 evolved from the AMST program’s YC-15, which was intended to replace the C-130s back in the 1980s, a derivative bid in 2012 would in a sense see the C-17 program come full circle.

Additional Readings

Categories: Boeing, Budgets, Contracts - Intent, Issues - Political, Lobbying, Project Management, Transport & Utility, USA

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