Boeing B777
Mitsubishi Heavy Industries (MHI), Kawasaki Heavy Industries (KHI) and Fuji Heavy Industries (FHI) have worked with Boeing for more than 30 years. All three industries have participated in developing the 767 since its inception in 1978. They supply fuselage panels, aerodynamic fairings, landing-gear doors and inspar ribs, which are equal to approximately 15 percent of the value of the 767 airframe. MHI, KHI, and FHI are also program partners on the 777. They participated in designing, manufacturing and testing of portions of the 777 airframe structure in the early 1990s and now supply about 20 percent of airframe, including fuselage panels and doors, the wing center section, the wing-to-body fairing and the wing inspar ribs. This 777 work package represents a significant increase from that of the 767. MHI, KHI and FHI will continue to work with Boeing for the duration of the 777 program.
When Boeing started building its successful wide-body 777 in the early 1990s, it outsourced 51 percent of the aircraft to suppliers and partners. Japanese airlines are major players in the Asia-Pacific market, the fastest growing region in the world. US commercial transports account for more than 80 percent of Japan's fleet. Japan also is the largest customer for the Boeing 747 and the largest foreign customer for the Boeing 767. The Japanese began as parts manufacturing subcontractors for the Boeing 747.
Aircraft development has always been a high-risk, demanding busine Historically, new product development costs have often exceeded the mar value of the company making the investment. Development costs for a major new program (such as the Boeing 777) may exceed $5 billion. The economics of the aircraft industry push toward international linkages formed share risk. U.S. aerospace companies have worked with the Japanese on civil aviation projects for decades. During that time the Japanese contributed significant risk capital to U.S.-led projects and proved to be high-quality providers of aerospace parts and sections.
The first international joint project for Japan was the Boeing 767 transport developed by Boeing. In 1977 they assumed a risk-sharing joint development role on the Boeing 767 program, with responsibilities for designing and producing the fuselage, the wing to body fairings, and the wing ribs. Five airframe manufacturers participated in a consortium for this national project. It can be estimated that there are the following four major reasons for cooperation between companies in Japan and the United States: 1) Risk sharing; 2) Enhanced capabilities through cooperation; 3) Participation in development and market entry; and 4) Mutual profit-making.
The next big project is the international joint development of the Boeing 777. The Japanese became program partners in the Boeing 777 program in 1991, accounting for 21 percent of the airframe content and risk capital. In FY 1993, the government of Japan reportedly provided 2 billion yen ($16 million) for the 777 project, 9 as well as loans from the Japan Development Bank (JDB) and the Export-Import Bank for development and for aircraft imports. The structure of the 777 partnership in Japan is almost the same as that for 767. For the development of 777, the Boeing's 777 Div. and Japan Aircraft Development Corporation (JADC) constitute the core promoting organizations. MHI, KHI, and FHI are taking part in the development and production and playing role of program partner. The total work share of Japanese firms will account for approximately 21% of the 777 structures. Besides airframe manufacturers, some 30 manufacturers also have been involved in the Boeing's civil transport programs as supplier and/or subcontractor.
Japan demonstrated consistent improvement in its aircraft component-building capabilities, after years of subcontracting from Western manufacturers. Japan's work share on Boeing jets has increased markedly, from the 737 to the 767 to the 777. The International Aircraft Development Fund (IADF), since its establishment in 1986, has been a major vehicle for government support of Japanese participation in new international commercial aircraft programs. The IADF, supported by corporate member contributions and indirect government aid, distributes interest-free loans that must be repaid out of revenue from the project. Although the Japanese financial contributions to a large project such as the 777 make up only a portion of the total, it is a significant portion. The Japanese are risk-sharing partners developing 20 percent of the airframe for the 777 project; in addition, support from the government (in the form of loans from the JDB and indirectly through the IADF) may well total $300 million to $400 million annually for the project, not to mention JDB and Export-Import Bank loans for aircraft imports that provide revenues to Boeing.
Boeing, the three heavy industry companies, and the Japanese government worked out a "program partnership" for the 777 twinjet. The structure of the deal itself was very similar to the 767, although Boeing originally offered equity participation similar to that contemplated for the 7J7. While the Japanese were interested in an equity share, Boeing set a minimum amount, and the Japanese were not prepared to assume a risk of that size. The 777 is a much larger airplane than the 7J7 was conceived to be, with correspondingly higher development costs. As an equity partner the Japanese heavies would be participating at a significantly higher level, and the business justification had to be compelling to their top management. Apparently, the companies were not willing to assume that great a risk, despite some apparent pressure from the government to do so. The Japanese ended up with nonequity participation and some increase in their role compared to the 767. There are differences between the two programs, the most obvious being increased Japanese work share. Boeing calculates that on the 777, the heavies are building 20 percent of the airframe.
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