Boeing, Mitsubishi Heavy in deal to cut costs of 787 wing production

FILE PHOTO: Workers at South Carolina Boeing work on a 787 Dreamliner for Air India at the plant's final assembly building in North Charleston, South Carolina December 19, 2013. REUTERS/Randall Hill/File Photo

(Reuters) - Boeing Co and Japan’s Mitsubishi Heavy Industries Ltd (MHI) announced they have agreed on steps to reduce the cost of producing the wings of the 787 Dreamliner.

MHI is the sole supplier of the 787 composite wings and manufactures them at its factory in Nagoya. The deal with MHI fits with Boeing’s company-wide drive of reducing its cost structure.

Under the new agreement announced in a joint statement on Monday, MHI will pursue increased efficiency in its production system and supply-chain through lean production methods, automation and other activities.

The pair will also study advanced aerostructure technologies for future generation commercial aircraft.

MHI said last year Boeing was seeking a new round of lower prices and changes in payment terms as the U.S. manufacturer stepped up efforts to conserve cash.

Delays in the 787 development and delivery, due in part to difficulties of managing a global supply chain, prompted Boeing to produce more of the upcoming 777X widebody, including the wings, at home despite MHI’s attempts to keep the work in Japan.

Japanese participation in the production of 777X parts will fall to 21 percent from 35 percent of the 787. MHI will however produce fuselage sections for the 777X program.

Reporting by Jamie Freed; Editing by Muralikumar Anantharaman