Boeing And Auto-Seat Supplier Form Joint Venture Following Delays

Owing to delays which have hampered production of jetliner cabins, plane maker Boeing has moved to form a joint venture with a major supplier of seats to the motor vehicle industry Adient Plc. The JV will be headquartered in the German city of Frankfurt where the initial production plant and technology center will also be based. The firm will market seats to leasing companies as well as airlines when they are making new orders as well as when retrofitting older planes.

Under Dennis Muilenburg, Boeing is pursuing a vertical integration strategy with the plane maker seeking to ensure more work is done in-house. This is a shift from the outsourcing strategy Boeing was pursuing ten years ago when the first Boeing 787 Dreamliner was being built.

Capacity crunch

According to Boeing the joint venture came about as a result of capacity crunch and production foul-ups with regards to seats. This has resulted in delayed jet deliveries and consequently frustrated customers. An example of this was with the premium Polaris seats on the 777-300ER ordered by United Continental Holding last year. Delays resulted in the schedule of the Zodiac Aerospace getting disrupted.

“Seats have been a persistent challenge for our customers, the industry and Boeing, and we are taking action to help address constraints in the market,” Boeing’s supply chain management senior vice president, Kevin Schemm, said in a statement.

The move by Boeing to form a joint venture with Adient might add tension between the plane maker and some of the big suppliers. The joint venture however will not come as a surprise since the two companies have been collaborating since March last year. Ray Conner, the vice chairman of Boeing and former head of the plane maker’s commercial airplane unit sits on the board of Adient.

Potential disruptor

With about 230 plants spread across the globe, Adient could potentially disrupt the airplane seats sector. Last year in September the investor relations vice president at Adient, Mark Oswald, indicated that the current base of supply was unsatisfactory for customers.

Adient and Boeing are said to be especially interested in the lie-flat seats that are not only complex but expensive. According to the chief executive officer of Adient, Bruce McDonald, business class cabins are what the joint venture will put a special emphasis on.

In the joint venture Boeing will have the minority stake of 49.99% while Adient will control the majority stake of 50.01%. The JV’s first customer service facility will be located in Seattle, Washington.

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