By David Pearson Of DOW JONES NEWSWIRES PARIS -(Dow Jones)- Cash-strapped contractors are the weak link in plans by aircraft makers Airbus and Boeing Co. (BA) to sharply increase production in the coming years, according to consultants PwC. A recent PwC survey of 93 suppliers across 12 key aircraft programs of five commercial and defense airplanes found that 21% of the suppliers studied aren't financially ready to support the fast pace of industrial ramp-up that the manufacturers require, PwC partner Christophe Stylemans said in a recent interview. Airframe manufacturers are asking suppliers to provide extra parts equivalent to 200 additional single-aisle jets like the Airbus 320 or Boeing's 737 every year, Stylemans said. The study looked at airplane programs of Boeing Co (BA), Bombardier Inc (BBD.A.T), Gulfstream Aerospace Corp., Lockheed Martin Corp (LMT), and Airbus, a unit of European Aeronautic Defence & Space Co NV (EAD.FR), which are ramping up production. With a massive order backlog equivalent to seven years of work, Airbus is increasing the production rate of its narrow-bodied A320 family to 42 by the end of this year from a rate of 36 one year ago. Airbus has said it would like to go even faster -- possibly as high as 50 a month after 2015 -- but fears that its suppliers won't be able to keep up. The manufacturer recently had to take the initiative in protecting its supply chain. Airbus took over PFW Aerospace, a Germany components maker, last September after it ran into financing problems due to delays in the Airbus A350 XWB and Boeing 787 programs. Airframe builders don't like the idea of vertical integration, however. "We were reluctant to do it, but we had no choice," an executive at EADS said. Airbus plans to sell the business once it gets back on its feet. Boeing is also accelerating its single-aisle 737 production to 42 a month by 2014 from 35 a month at present and has said it may consider adding a third assembly line that would increase output to 60 a month. "The suppliers bought into many of these programs a long time ago and most often they never planned for such high production rates," said Stylemans. A supplier facing its own production bottlenecks has a direct impact on the aircraft makers' final assembly lines, he said. The increased activity mean that suppliers are increasing production using existing capacity but also have to invest in install new equipment and train personnel for new programs, adding to the risk of delays all round, Stylemans said. One solution for the aircraft manufacturers faced with struggling supplier can be to rewrite contracts so that the customer shoulders part of the development costs, Stylemans said. -David Pearson, Dow Jones Newswires; +331 4017 1740, david.pearson@dowjones.com
