"Heavies" help carry 787
Seattle Times aerospace reporter
Considerably smaller than Boeing in aerospace
Mitsubishi Heavy Industries
Aerospace revenue: $2.1 billion in fourth quarter of 2004, or 14 percent of $15.4 billion quarterly total.
Employment: 3,725 employees at 3 plants around Nagoya. Around 100 engineers and 10 plant workers are currently dedicated to the 787.
Kawasaki Heavy Industries
Aerospace revenues: Estimated at $387 million in fourth quarter of 2004, or 15 percent of $2.6 billion quarterly total. Estimate calculated as one-third of its reported nine-month total.
Employment: 3,200 aerospace workers at 3 Nagoya plants. Also employs 1,020 contractors on site.
About 90 people, mostly engineers, now working full time on the 787; about 100 factory workers will be needed to assemble the 787 parts. That compares with 60 workers who assemble Kawasaki's parts for 777.
Fuji Heavy Industries
Aerospace revenues: $391 million in fourth quarter of 2004, or 4 percent of $9.9 billion quarterly total.
Employment: No information available.
Aerospace revenues: $13.3 billion in fourth quarter of 2004.
Employment: 57,033 workers in Washington state as of April 7.
Source: Company financial reports and interviews
NAGOYA, Japan — In the corner of a Mitsubishi Heavy Industries aerospace plant, a key piece of Boeing's future is taking shape.
Eight Japanese workers clad in powder-blue jackets cluster around a 23-foot-long wedge of hard black material perched on a waist-high table. They drill, manipulate and measure the triangular slab as three Boeing engineers, wearing new Mitsubishi hats a bit small for their heads, sit nearby monitoring data on laptop computers.
The group is testing assembly procedures for the revolutionary wings — made of carbon-based composites, not aluminum — that will carry aloft Boeing's first all-new jet in more than a decade.
These Japanese workers are beneficiaries of Boeing's decision to handle only the final assembly of its new 787 Dreamliner. Most major pieces will be designed and built outside Boeing — 35 percent by the three Japanese "Heavies," as the nation's top manufacturing conglomerates are known.
It's the first time Boeing has outsourced design and assembly of a new plane's wings.
Japan's large role in the 787 reverberates across the global aerospace industry. It has spurred construction of new factories around Nagoya, while Boeing adds nothing similar at home.The Japanese government is expected to pump an estimated $1.6 billion into its companies' 787 work, creating a flash point in the trade dispute between the United States and Europe over aircraft subsidies.
And the advanced technology that's being shared brings Japan's aerospace companies closer to the goal of creating their own commercial aircraft. Earlier this month, Mitsubishi Heavy Industries told the government it may introduce a regional jet as early as 2008.
A visit inside the factories of Mitsubishi and Kawasaki Heavy Industries, two of Japan's largest and oldest aerospace companies, drives home the scale of Japan's work for Boeing and its implications for the industry.
Japan's economic engineNagoya is two hours southwest of Tokyo by bullet train. With nearly 2.2 million residents, it is Japan's fourth-largest city. But it is little known abroad. It has neither the size of Tokyo, the tourist offerings of Kyoto nor the history of Hiroshima.
Yet Nagoya and the surrounding Aichi Prefecture, akin to a state, are Japan's most vital economic engine, thanks to a manufacturing sector that has prospered while the rest of the country has struggled with deflation and recession.
As an industrial center, "it is like the Cleveland or Detroit of Japan," said Michel Weenick, vice president of the American Chamber of Commerce in Japan's Nagoya office.
Toyota, headquartered nearby in Toyota City, dominates the region with 12 manufacturing plants and roughly 60,000 workers. Those plants pump out nearly 40,000 cars and trucks every week.
The region and its famously thrifty residents suffered far less than other parts of Japan after the country's economic "bubble" burst in the late 1980s.
"Our bubble had about half the air in it of Tokyo and Osaka," Weenick said.
Nagoya's unemployment rate is 3.5 percent, well below Japan's average of 4.7 percent. Its economy is expanding at twice the national rate.
The city's fiscal health has enabled the region to make investments that are raising its profile.
The 2005 World Exposition opened March 25 in rolling hills midway between Nagoya and Toyota City. Organizers expect the six-month fair to attract 15 million visitors, including 1.5 million foreigners.
Central Japan International Airport, the world's newest landing strip, opened for business Feb. 17. Built on a man-made island in Nagoya Bay, the $6.2 billion airfield is projected to handle 12 million passengers this year.
The airport also offers 24-hour cargo operations and will handle a wide array of imports and exports.
Perhaps the largest products shipped out will be the massive 787 wings and fuselage sections fabricated in Nagoya. These will float 15 to 20 minutes by barge to the airport, then will be flown via a specially modified 747 to Everett.
From Zero to 787The region has a long history of building aircraft.
Kawasaki began making airplanes in 1918, two years after Bill Boeing set up shop on Lake Union, and built its first aircraft factory in 1923 north of Nagoya on the site of today's Gifu Works.
Mitsubishi planned to build submarines in Nagoya after World War I. But after discovering the bay was too shallow, it began building airplanes in 1920 in nearby Oye. (That plant, one of three run by Mitsubishi in the region, is where 787 wing production is being tested.)
By the late 1930s, the Japanese were among the world's top aircraft producers. Mitsubishi alone churned out 18,000 planes and 53,000 aircraft engines during World War II, including all of Japan's infamous Zero fighters.
U.S. occupation forces shuttered Japan's aviation industry after the war. But the restrictions were loosened in 1952 so that the Japanese could help repair U.S. aircraft flown in the Korean War.
Since then, Japan has used alliances with Boeing and other foreign aerospace companies to gradually re-establish its status as a global industry leader. Its companies supply 16 percent of each Boeing 767 jet, and 21 percent of each 777.
Japan's airlines have been among the staunchest Boeing customers as well. All-Nippon Airways launched the 787 program with a 50-plane order in April 2004, and Japan Airlines ordered 30 787s and took options for 20 more in December.
The 787 marks another hefty increase in the quantity and quality of aerospace work in Japan. But the Mitsubishi and Kawasaki plants in Nagoya show that these companies are well-prepared for the role.
Baked in giant ovensVirtually every manner of flying machine can be glimpsed during a tour of Kawasaki Heavy Industries' sprawling Gifu Works complex.
A Lockheed C-130 military-transport plane and a Boeing Chinook CH-47 helicopter await repairs. An OH-1 observation helicopter hovers in the air, undergoing tests.
In an adjacent hangar, workers overhaul Japanese-built T-4 military jet trainers emblazoned with Rising Sun logos.
A flatbed truck arrives at the Works' south plant to deliver part of an overhead crane to a new building. There, Kawasaki will assemble nearly 100 CX and PX troop transports, large planes designed and built entirely in Japan.
Some of Gifu's most intriguing work, though, occurs in the modest-looking "composites shop."
The 787 will be the first Boeing commercial jet with wings and fuselage constructed almost entirely of composites. Made from woven strands of advanced carbon fibers melted into shape in giant ovens, composites are lighter than aluminum and resist corrosion better.
The Japanese suppliers have not built composite parts for Boeing before, but they have plenty of experience with the cutting-edge materials.
Kawasaki's composites shop alone contains five of the composite-baking ovens, known as autoclaves.
They turn out wing spars and skins for Embraer's hot-selling line of 170 and 190 regional jets; payload capsules for Japanese H-II rockets; and 30-foot-long horizontal stabilizers for the CX and PX military transports.
Mitsubishi, which has three aerospace plants around Nagoya, likewise does plenty of work with composites. Its engineers designed and constructed the all-composite wing used on the Japanese air force's F-2 fighters.
Its Oye plant, where the 787 tests are being conducted, contains the largest autoclave in Japan, 50 feet long and more than 15 feet in diameter. That won't be large enough to produce the 98-foot-long wings of the 787, however, so a new one is on order.
The plant also supplies parts for Airbus. A few steps from the 787 wing prototype, in various stages of production, are cargo doors for Airbus A330 and A380 wide-body jets.
About a mile away on Nagoya Bay, cranes and bulldozers are laying the groundwork for two new Mitsubishi 787 factories expected to cost around $345 million.
Kawasaki is more than tripling the size of its Nagoya Works 1 facility, where it now assembles 777 fuselage panels.
Fuji Heavy Industries, the third Boeing partner in Japan, is expanding as well.
Founded as Nakajima Aircraft in 1917, Fuji's line of Subaru automobiles is far better known than its aerospace business. Yet Fuji builds the center wing box of each 777 and it will supply the same section for each 787.
Standoff with EuropeJapanese government support of the 787 is one area of dispute in the standoff between the United States and the European Union over subsidies to Boeing and its European rival, Airbus.
U.S. trade negotiators contend Airbus has used $15 billion in government launch aid to become the world's dominant aircraft maker. They want the loans to stop.
The Europeans counter that Boeing has received generous state tax cuts in Washington state and Kansas (home to its Wichita operations), plus billions in federal research-and-development support over the years from the Department of Defense and NASA.
European leaders also say Japan's government funding for 787 work by the Heavies amounts to another improper subsidy for Boeing. Peter Mandelson, the European Union's trade commissioner, put that aid at $1.6 billion in a Washington Post editorial last month.
Boeing says it does not receive money from Japan and has no influence over its decision-making.
"This is an agreement between the [Japanese] government and the Heavies," said Loretta Gunter, a Boeing spokeswoman. "Boeing isn't a party to it."
The actual amount of Japanese aid remains unconfirmed and may be in flux, since Boeing has not signed final contracts yet with its Japanese suppliers.
"The Japanese government cannot comment on the details of aircraft loans," said a spokesman for Japan's Ministry of Economy, Trade and Industry.
Mitsubishi and Kawasaki declined to make senior executives available to discuss the 787, citing the sensitivity of the political discussions and the contract negotiations with Boeing.
The contracts and details of the government aid may not be settled — publicly, at least — until the U.S.-EU dispute is resolved.
Boeing's share of 787 development costs is expected to be around $5.8 billion, according to an internal company analysis obtained by The Seattle Times last year.
The leader of the Machinists union at Boeing, Mark Blondin, traveled to Japan in March to tour the Nagoya factories and meet with Japanese executives and union leaders.
Blondin said he obtained salary data that indicate Japanese workers make as much or more than Boeing workers in the United States. If costs are not lower abroad, he said, the Machinists want to know why Boeing is not retaining more jobs in the U.S.
"Those assembly jobs and fabrication jobs we saw are lost opportunities for people in Puget Sound and Portland and Wichita," said Blondin, who represents 17,000 workers as president of International Association of Machinists, District 571.
"All these programs reflect several thousand jobs, several thousand Boeing-related jobs," he said.
Blondin plans to use what he learned about Japanese working conditions, wage rates and union relations when the Machinists begin contract negotiations with Boeing later this year. He was particularly dismayed to see in Nagoya composite-parts production techniques that were refined with the help of factory workers in the United States.
"To take it out of Puget Sound, where it's being developed, that isn't right," he said. "We'd like to at least see some co-production."
At the same time, Blondin was struck by what he called the "worker-friendly" Japanese management approach.
Japanese aerospace companies "have not had a layoff there in 26 years," Blondin said. He said he learned that if business declines, the Japanese Heavies pull work back from their suppliers rather than cutting employees.
"There's a culture and economy there that respects the workers," he said.
Next, an all-Japanese planeWhile contributing to Boeing's next product, the 787, Japan's aerospace industry is also contemplating its own. The nation's leading business newspaper, Nihon Keizai Shimbun, reported in April that Mitsubishi plans to design and build 70- to 90-seat regional jets by early 2009.
A Mitsubishi spokesman confirmed the company is developing an experimental 50-seat jet and is conducting market research and financial analysis for regional jets with up to 90 seats. It hasn't decided whether to start marketing such jets, though.
Japan's government has been working with manufacturers led by Mitsubishi since 2003 on a $500 million study of a Japanese regional jet to carry 30 to 50 passengers. Mitsubishi's plans grew out of that project, though it bumped up the plane's seating capacity after concluding demand was limited for a smaller plane.
The company "plans to apply technology for creating light, strong composites that it acquired through joint development with Boeing on the U.S. company's 777 and 787 aircraft," the Keizai Shimbun article said.
The Mitsubishi aircraft would compete with planes now made by Brazil's Embraer and Canada's Bombardier, though not with Boeing, whose smallest current plane is the 110-seat 737-600. But Japan's goals do not end with small jets.
Keiji Tachikawa, the ex-CEO of NTT DoCoMo's highly successful mobile-phone business, recently became president of the Japan Aerospace Exploration Agency.
Speaking to the media in Tokyo last week, Tachikawa laid out an ambitious 20-year plan to increase Japan's exploration and utilization of space.
One top priority is developing an experimental hypersonic plane capable of traveling at more than five times the speed of sound. Tachikawa said engines using hydrogen fuels will make such travel economical and environmentally friendly, overcoming two problems that contributed to Boeing's shelving of its plans for a high-speed Sonic Cruiser.
Airplane builders today are focusing on improving efficiency to lower the cost of flying. But that leaves a major need unfulfilled, he said.
"There are many people who have to take long-distance flights," Tachikawa said. "For them, time is very important.
"I say with great certainty that 20 years from now we will have much shorter flights."
It's a good bet Japanese companies will play a major role in fulfilling Tachikawa's vision.
Less clear is whether they will be partners to Boeing and Airbus — or competitors.
Seattle Times aerospace reporter David Bowermaster is on a six-month Fulbright Foundation fellowship in Japan. firstname.lastname@example.org
Seattle Times aerospace reporter Dominic Gates contributed to this story.
Information in this story, originally published May 1, was corrected May 13. A previous version of this story erred in calling Boeing's three Japanese industrial partners "risk-sharing partners." While the Japanese companies share the 787's costs by taking on some design and development work, they don't contribute equity or share in the profits and therefore are not risk-sharing partners. Boeing said recently that its risk-sharing partners will contribute $600 million to 787 development this year, but it declined to identify those partners. On previous programs, the airplane engine-makers GE and Rolls Royce have been risk-sharing partners.
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