Boeing Co. and a key supplier are wrestling to produce a crucial, innovative component for the updated version of its workhorse 737 jet, amid concerns that a shortage could derail ambitious plans to boost production.

Difficulties consistently manufacturing part of the engine thrust reverser that slows jets on landing have been flagged by Boeing as the biggest development challenge at the plane maker's commercial unit, according to senior industry officials.

While Boeing executives have recently played down the potential impact, there remain significant concerns among industry executives and engineers familiar with the issues that supplier GKN PLC won't be able to produce enough of the component to support the rapid production transition to Boeing's 737 Max jetliner.

"It is by far the gorilla in the room," said one person familiar with Boeing's concerns.

Boeing plans to boost monthly output of the single-aisle Max from less than one to 52 before the end of the decade, the steepest-ever increase in jetliner production. Investors are monitoring any problems that could weigh down its expansion plan and weaken Boeing's closely watched cash-flow projections.

Boeing executives acknowledged the challenges, but the company said it has "every confidence that our production processes" will hit output targets, and is working to demonstrate the component can be produced as quickly as it is needed.

The problems stem from the inner wall of the thrust reverser, which is made from an exotic titanium honeycomb to save weight, fit the available space and withstand the high temperatures of the engine, which is made by CFM International, a joint venture between General Electric Co. and Safran SA.

"We are really having to muscle through that one…but as with a lot of new technology we're finding that we're having to really stabilize the process," Keith Leverkuhn, vice president and general manager of the 737 Max program, said in a recent interview.

"Nothing's happening as fast as I would like in general," he said, adding that GKN is "applying all the necessary expertise from across their enterprise" to make it work.

One senior supplier executive said the availability of enough inner walls is at the top of Boeing's development concerns. "It's a [production] rate question," the person said. Boeing is asking "I'm having this issue today, what does it tell you about my rate readiness?"

Job listings seeking engineers to work on the inner wall project said GKN will need to produce enough to supply 50 aircraft a month by 2018.

Signs of trouble with the inner wall structure have been brewing for some time. According to a September 2014 regulatory filing, Spirit AeroSystems Holdings Inc., which makes the 737 engine thrust reverser, transferred responsibility for working with GKN on the inner wall back to Boeing.

"We've got a lot of attention on it," said Scott Fancher, Boeing's vice president of airplane development, adding that increased oversight is needed for new technology. "Titanium is famous for being challenging from a producibility standpoint."

Boeing said the component doesn't threaten its ability to fly in early 2016 and certify the jet with regulators in 2017. Mr. Leverkuhn said the company has done a "done tremendous amount of work" to be ready for its production ramp-up.

The senior supplier executive noted the first walls produced for testing the new CFM International engines were "able to make it to the specification, but it was very time-consuming."

Both Boeing and rival Airbus Group SE are pursuing record production increases to quickly deliver leaps in efficiency to cost-conscious airlines. The jet makers have invested heavily to monitor their global supply chains to introduce new engine technology on their cash cow single-aisle jets.

"The ramifications are massive when you're talking about something that is providing such a large portion of Boeing's profits," said Kevin Michaels, vice president with ICF International's aerospace consulting practice. He estimated the existing 737 model contributes 40% to 45% of the earnings from operations at Boeing's commercial arm, which totaled $6.4 billion in 2014.

A GKN spokeswoman declined to comment, referring question to Boeing.

To be sure, Boeing and GKN have as much as two years to resolve the engine wall issues before its first deliveries, starting with Southwest Airlines Co. in the third quarter of 2017.

However, the ramping up production of 737 Max parts is already well under way. Boeing in late May began preparing the first wings in its Washington state factories, and Spirit plans to to deliver the first fuselage to Boeing ahead of the September start of final assembly on a new dedicated line.

Boeing has orders for 2,839 of the 125- to 200-seat Max jets, and plans to raise overall production of all 737 models to 47 each month in 2017 and again to 52 in 2018, from 42 today.

Write to Jon Ostrower at jon.ostrower@wsj.com

 

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(END) Dow Jones Newswires

August 20, 2015 17:45 ET (21:45 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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