UPDATE 1-Boeing taps S.Carolina to make longest 787-10 Dreamliner

Wed Jul 30, 2014 6:01pm EDT

(Adds reaction from unions and analysts)

By Harriet McLeod

NORTH CHARLESTON, S.C., July 30 (Reuters) - Boeing Co chose on Wednesday to build its biggest Dreamliner, the 787-10, exclusively at its South Carolina plant in North Charleston, saying the jet is too large to build economically in more than one location.

Investors are banking on rising 787 production to lower the cost of making the jet and generate cash flow that can be used to reward shareholders.

The newest and longest of three 787 models, the 787-10 also is eagerly awaited by airlines seeking its increased seating. The plane will carry 323 passengers, 33 percent more than the 787-8 and 15 percent more than 787-9, with significantly lower fuel consumption than current-generation jets of similar size.

But the new plane's longer fuselage sections will be "too long to be transported efficiently" from North Charleston to Everett, Washington, where Boeing has two 787s assembly lines, Boeing said in a statement.

The decision drew immediate criticism from the machinist and engineering unions, as the Boeing plan will move work to a non-union factory.

"It's part of the company's plan to redistribute commercial production away from Washington state," said Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace (SPEEA), which represents about 23,000 workers at Boeing.

International Association of Machinists District 751 President Tom Holden said in a statement that he was disappointed at Boeing's decision. The union's 31,000 members in the Seattle area are the "best choice" for producing quality work on schedule, he said.

But some analysts said the decision had been expected, in part because the jet's large body pieces were difficult to ship, and because two assembly lines would be expensive for the 787-10. Boeing has orders for just 132 of the jets, about 13 percent of its 787 orders, which total 1,031 planes.

"The idea of building the same variant in multiple locations makes no sense," said Richard Aboulafia, an aerospace analyst at the Teal Group in Fairfax, Virginia.

Systems for the mid- and aft-body sections for the smaller 787s are installed at the North Charleston plant and most of the sections are flown to Everett for final assembly. The South Carolina plant also assembles some of the smaller 787s.

"We looked at all our options and found the most efficient and effective solution is to build the 787-10 at Boeing South Carolina," Larry Loftis, vice president and general manager of the 787 program, said in a statement.

"This will allow us to balance 787 production across the North Charleston and Everett sites as we increase production rates."

The North Charleston line will continue to produce 787-8 and 787-9s, Boeing said. The site also will increase production to five a month in 2016 from three a month currently, Boeing said.

Boeing plans to ramp up 787 production from 10 a month currently to 12 a month in 2016 and 14 a month by 2020. The Everett facility now assembles seven 787s a month.

The 787-10 is being designed at Boeing's Everett factory. Assembly of mid and aft sections will begin in 2016, Candy Eslinger, spokeswoman for Boeing South Carolina, said on Wednesday. Final assembly of the 787-10 is due to begin in 2017.

The 1.2 million-square-foot South Carolina assembly building was designed for capacity increases, Eslinger said. Later this year, the plant will begin final assembly of 787-9 jets, which are currently being made exclusively in Everett. The South Carolina plant began production in 2011 and rolled out its first airplane in April 2012.

"Introducing the 787-10 in North Charleston takes advantage of that facility's capacity while allowing the Everett facility to continue improving productivity as it focuses on the 787-8 and 787-9," Boeing said. (Reporting by Harriet McLeod and Alwyn Scott; editing by Andrew Hay)

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