boeing_rev1_2012-4-5

School of Aerospace, Mechanical and Manufacturing Engineering

BUSM 1222 – International Business

Internationalization

Due Date: 27th April, 2012

Topic: Boeing Australia

Lecturer: Prof. Nattavud Pimpa

Student: David Chipperfield

Student No.: S3135373

Word Count: 2,469

AERO2364 – Contemporary Issues in Aerospace

David Chipperfield – S3135373

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Table of Contents

TABLE OF CONTENTS................................................................................................................................II

LIST OF FIGURES.......................................................................................................................................II

1 INTRODUCTION.............................................................................................................................3

2 HISTORY OF THE BOEING COMPANY....................................................................................3

3 COMING TO AUSTRALIA............................................................................................................6

4 FACTORS AFFECTING THE MOVE..........................................................................................9

5 THE IMPACT IN AUSTRALIA...................................................................................................10

6 LOOKING TO THE FUTURE......................................................................................................12

7 CONCLUDING REMARKS AND PERSONAL INSIGHT.......................................................13

8 BIBLIOGRAPHY...........................................................................................................................15

List of Figures

FIGURE 1 REPLICA B&W MODEL 1 FLYING OVER SEATTLE, (PELLETIER, 2010) 4

FIGURE 2 CONSOLIDATION OF THE MAJOR US AEROSPACE COMPANIES,

(HTTP://WWW.ECONOMIST.COM/NODE/1223580 VIEWED 226/04/2012) 5

FIGURE 3 BOEING AUSTRALIA LOCAL INVESTMENTS, (BOEING AUSTRALIA, 2012) 8

FIGURE 4 BOEING SUPER HORNET, (HTTP://WWW.AIRLINERS.NET , VIEWED 26/4/2012) 11

FIGURE 5 BOEING 787 DREAMLINER, (HTTP://PERSONAL.PSU.EDU/TYL5059/787.JPG , VIEWED 26/4/2012)

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1 INTRODUCTION

The key to international business in the ability to analyse the movements of a company

and its international ventures. In the modern, age globalisation is becoming a norm and

multi-national companies are the major figure heads in industry due to their vast reach

in the markets. Globalised companies can have an effect on all aspects of a country that

it branches into, from economy and health as well as local politics. US aerospace

company, Boeing is a prime example of these items; Boeing has expanded its global

reach to countries including Japan, China and Australia, with the latter being the

company’s largest foothold outside the US base. This report will investigate the key

items in Boeing’s expansion into Australia, and the impacts the venture has had on the

Australian landscape.

2 HISTORY OF THE BOEING COMPANY

The Boeing Company is a manufacturer of commercial jetliners and military aircraft,

and one of the largest aerospace companies in the world.

The idea for The Boeing Company was born on a lake in Seattle on July 4, 1914, when

William E. Boeing, a lumber company executive from Michigan, took a ride on a

Curtiss seaplane with a barnstormer named Terah Maroney and Navy Commander

Conrad Westervelt, (Pelletier, 2010). Despite having no initial knowledge about

aircraft Boeing enlisted Westervelt to design an aircraft for him to build, this would

result in the Model 1, B&W Utility aircraft. On July 15, l916, Boeing tested his aircraft

and incorporated his company as the Pacific Aero Products Company, which would

later become The Boeing Airplane Company in 1917, (Pelletier, 2010).



Figure 1 Replica B&W Model 1 flying over Seattle, (Pelletier, 2010)

From here The Boeing Aircraft Company blossomed. The company grew during both

world wars with the development of all metal aircraft, propulsion technology and

directional radios for navigation and night flying, (Pelletier, 2010). By the end of the

Second World War had a large repertoire of well-known aircraft including the B-29

"Super Fortress" which dropped the atomic bombs on Hiroshima and Nagasaki in

August, l944 ending the war.

During the space race in the 1960’s, Boeing was the prime integrator for the

development of the Saturn V rocket which helped put man on the moon.

In 1961, Boeing Aircraft Company changed its name to the Boeing Company at the

time when American consumers expanded through the birth and adolescence of

commercial passenger airline travel. The company built some of the most popular

commercial airliners between 1935 and 1965 including the 707, 727, 737, and the 747

“Jumbo” Jet. The 747 was so expensive to develop that it almost drove the company

into bankruptcy, (Pelletier, 2010).

Boeing has faced some setbacks over its life. In 1969, Boeing reduced its workforce

from 105,000 to 38,000 due to a lack of aircraft orders. Labour problems led to a strike

that lasted 69 days in 1995, resulting in $2 billion in financial losses to the company as

well as substantial trickle-down losses to the numerous subcontractors and communities

in which Boeing operates, (Bauer, 2008).

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In the early 1990’s Boeing sort to begin diversifying the company to shift from 85%

commercial and 15% defence, (Georgetown Journal of International Affairs, 2003).

This also marked the era of mergers for the Boeing Company as downsizing and

consolidation within the modern aircraft industry affected lead to a number of

competitor companies being integrated into Boeing’s operation. Boeing and Rockwell

completed a merger of their defence and aerospace units in 1996, which would also

become Boeing’s first step onto Australian soil. Additionally Boeing completed its

merger with McDonnell Douglas Corporation on August 1, 1997 despite some

difficulties getting approval from Europe, (Bauer, 2008). In 1993, Boeing did attempt a

takeover bid from the aeronautical side of defence firm General Dynamics, however

they were beaten by Lockheed Martin who acquired the company from $1.5 Billion,

(Pelletier, 2010).

Figure 2 Consolidation of the Major US Aerospace companies, (http://www.economist.com/node/1223580 viewed 226/04/2012)

During the 1990’s Boeing operated through four divisions and is now organised into two

business units; Boeing Commercial Airplanes and Boeing Defence, Space and Security.

With corporate headquarters in Chicago, Boeing employs more than 170,000 people

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http://www.economist.com/node/1223580



across the world, with Australia having the biggest presence outside the US (Boeing

Company, 2012).

3 COMING TO AUSTRALIA

Boeing’s footprint within Australia is said to begin in 1927 when de Havilland Aircraft

Company began sales and maintenance at Fishermen’s Bend, Melbourne. However

Boeing’s real first step into Australia occurred in 1959 when they established their first

office in Sydney as a base for sales and support of their commercial jet fleet, (Boeing

Company, 2012). In 1996, Boeing went on to acquire majority of the space and

military activities of Rockwell International Corporation, which included the Australian

businesses Rockwell Electronics, and AeroSpace Technologies of Australia (formally

the Government Aircraft Factories), to become Boeing Defence Australia, (Boeing

Company, 2012). Under the new banner the company it was awarded contracts for the

modernization of the Australian Defence Forces.

In 2000, Boeing acquired Hawker de Havilland (formally de Havilland Aircraft

Company) to become Boeing Aerostructures Australia and in 2002-2003 they moved to

consolidate their interests under a single entity now known as Boeing Australia

Holdings Pty Ltd, (IBISWorld Company Report, 2010).

Over the past 10 years, Boeing has made a number of additional acquisitions within

Australia including Jeppesen Optimization Solutions Holding Pty Ltd in 2006,

Jeppesen Marine Australia Pty Ltd and global supply chain company Aviall in 2008

and Insitu Pacific Pty Ltd in 2009, (IBISWorld Company Report, 2010).

Currently Boeing Australia employs about 3,500 people at its facilities and offices

throughout Australia and is divided into four separate divisions; Commercial Airplanes,

who develop major parts for Boeing’s commercial aircraft including the 737, 747 and

new 787, Boeing Defence, Space & Security, who supply aircraft and provisions to

global military, government and commercial clients which include the Australian made

Wedge-Tail radar system, F/A 18 Hornet and Super Hornet, and Boeing Research and

Technology who carry out Boeing Australia's research and development activities,

(IBISWorld Company Report, 2010).

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To date, Boeing Australia has invested more than $350 million into the upgrade of local

facilities, more than $200 million in research and development, and a further

$100 million in technology transferred to Australia. Boeing has exported from Australia

$2.5 billion worth of complex aerostructure components, (Boeing Australia, 2012).

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Figure 3 Boeing Australia local investments, (Boeing Australia, 2012)

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4 FACTORS AFFECTING THE MOVE

There are a number of factors that attributed to Boeing’s shift into Australia from the

first push in 1959. Initially Boeing’s move was to simply setup a base for sales and

support of the Boeing aircraft fleet, which was being newly implemented into the

Qantas fleet, (Qantas, 2012). With Qantas becoming a new international importer of

Boeing aircraft, this would give rise to the need for an Australian foothold from the US

based manufacturer as the distance between the two countries was too great for aircraft

support to remain in America.

The steps Boeing took for their engineering side of business could be seen as being not

quite as simple as the expansion of sales and more of an accident. The engineering

aspect of Boeing entered Australia after the acquisition of Rockwell International, who

entered the country the year before in the purchase of the Government Aircraft

Factories, (GAF) (Walker, 1995). Rockwell made the push to purchase GAF after they

began to struggle for aviation contracts, and planned to;

To expand its business and export activities through access to substantial

new work, advanced technology and enhanced financial resources, (Walker,

1995).

With the holdings in Australia, Rockwell was able to secure a number of contracts

from the Australian military due the increased technical knowledge Rockwell had

at their disposal. This was during the time when Boeing planned to diversify its

efforts in the defence market, and as a result they acquired most of the defence

and space activities of Rockwell, with the by-product of the merger being the

Rockwell holdings in Australia. The merger also made Boeing the largest

aerospace and defence company in the world, (Pelletier, 2010).

Boeing proceeded to use the foothold in Australia as a potential model for the

company's “aspirations to internationalise its mostly US-based operations and

become a truly global company.” Australia formed the strategic base to allow

Boeing to expand its operations to emerging Asian economies, (Thomas, 1997).

Using Australia as the regional base in the Australasia region, Boeing has

increased defence and aerospace activities including research and development

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and further expanded its operations both in Australia and into China and India,

(Thomas, 1997).

5 THE IMPACT IN AUSTRALIA

Boeing has caused a profound effect on Australia. In 2006 Boeing directly contributed

$362 million to the Australian GDP and through its interaction with other Australian

businesses it is estimated the company indirectly contributed a further $174.4 million.

In 2010 this figure has risen to over $790 million, approximately 0.056% of the

country’s GDP, (IBISWorld Company Report, 2010).

As well as the 3,803 people Boeing employs in Australia, there is a further 1,400

Australian jobs from related supplier roles, (Kelly, Boeing boosts presence down under

with Phantom Works Australia, 2008).

In 2008, Boeing’s introduction of the Research and Technology department has

resulted in an increase in technological knowledge and intellectual property within

Australia. The facilities in Melbourne and Brisbane generally focus on manufacturing

research which has led to Boeing Aerostructures Australia becoming one of the most

advanced manufacturing facilities in the world, (Kelly, Boeing is no Phantom in Oz,

2008).

Boeing also works closely with selected Australian universities to enhance the

undergraduate curricula, support the continuing education of Boeing staff, recruitment

and collaboration on research that may be beneficial to the company. In 2008, Boeing

contributed to four Australian universities; University of Queensland, Queensland

University of Technology, RMIT University and University of New South Wales, with

funds used for student projects, travel bursaries, scholarships, awards and student

outreach programs.

The impact Boeing has had on Australia has also been felt within the political aspect of

Australia. In 2002 Boeing announced that former Liberal leader Andrew Peacock

would become the new head of Boeing Australia, with this being dubbed;

“A brilliant strategic appointment.” (Baker, 2007).

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It is believed Mr Peacock helped smooth the way for those working on the sales of the

FA-18F Super Hornet aircraft to get their message across to Defence Minister, Dr

Brendan Nelson regarding the $6.6 billion purchase. It is understood that Boeing

members personally briefed Nelson in 2006 on the Super Hornet and how it could fill

any "capability gap" Australia might encounter with its purchase of the new Joint Strike

Fighter (JSF) it was to acquire in 2012, (Baker, 2007).

"They targeted Nelson and probably fairly quickly read into his personality, appealing

to his vanity and desire to be seen as someone who is in charge. A decision maker,"

(Baker, 2007).

The purchase of the Boeing FA-18F has raised significant controversy in the Australian

parliament, with arguments over the disregard for normal purchasing protocol and the

capability gap of the aircraft causing Australia to “lose its air superiority in the

Australasian region,” (Fowler, 2007).

Figure 4 Boeing Super Hornet, (http://www.airliners.net, viewed 26/4/2012)

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http://www.airliners.net/



6 LOOKING TO THE FUTURE

Looking to the future, Boeing has displayed strong efforts for the future works on the

company, especially its Australian efforts by incorporating a number of its key

subsidiaries into the global pool.

Currently Boeing Defence Australia is looking beyond the host government for

potential sales. Boeing is pursuing export deals of defence equipment designed and

manufactured in Australia with the Insitu Pacific subsidiary seeking to operate the

ScanEagle unmanned aerial vehicle on behalf of the Singapore navy, (Trimble, 2010).

Boeing’s commercial aircraft efforts have been shifted after the close of the operations

in Bankstown, NSW. Boeing Aerostructures consolidated its efforts in the new facility

in Melbourne with the bases becoming a centre of excellence within Boeing for

building composite aircraft structure. The newly renovated factory is where the

company continues to make rudder and elevator components for the 777 airliner, the

movable leading edge on the 747-8 Jumbo and moving trailing edges on the new 787

Dreamliner.

“The 787 work represents 50% of Boeing's business at in Melbourne, and is

projected to account for $4 billion in business over the next 20 years,”

Mark Ross, managing director of Boeing Aerostructures Australia,

(Trimble, 2010).

The 787 work is currently in the stage of ramping up production as backlogs of the

aircraft cause major issues for the company. While the ramp up efforts is going to plan

some analysts have questioned whether Boeing will be able to ramp up production of

the 787 to reach its target of 10 aircraft a month by the end of 2013, this is due to on-

going supplier issues that have caused the initial aircraft delays. Australia’s efforts in

the production have been successful thus far with production already supporting six

units per month, (Sloan, 2012).

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Figure 5 Boeing 787 Dreamliner, (http://personal.psu.edu/tyl5059/787.jpg, viewed 26/4/2012)

7 CONCLUDING REMARKS AND PERSONAL INSIGHT

The look into the Boeing Company and its movements into Australia has given keen

insight in workings of the aerospace giant. Upon discussions with colleagues who

work of the Melbourne base of operations as well as those in the aerospace industry, it

was interesting to view how differently each view the company’s efforts down under.

Naturally those working for the group see the company as a god send, and with the

large revenue and on-going support to the local community, it is easy to see why,

(Sloan, 2012). However, those who look from the outside of the company argue a

different story, this is especially dominant over the Super Hornet acquisition which

Boeing had a hand in, (Baker, 2007).

From a personal view point the role that the company has had in the shaping of the

Australian aerospace community is outstanding. Prior to the writing of this report, the

political influence that Boeing displayed was only a rumour and their grasp just a

comment from a rival competitor, now however it is apparent. It was interesting to see

how Boeing did come to be in Australia, and despite most of the documents claiming

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otherwise, mostly Boeing reports, it can be seen as an accident. The US based

company did not truly begin to globalise itself until it became necessary, compared to

that of Rockwell and other groups, and they only expanded to Australia as it proved to

be a “strategic” facility that would help in the further their expansion .

Nevertheless, Boeing’s work in Australia has been highly beneficial. The increase in

technological capabilities and the global reach that is now available within the industry.

This is easily summed up by a comment made during Boeing’s initial move down

under in 1996;

“Boeing Australia is worth far more to Australia as a fully integrated part

of the global company… [and] in a globalised company you get

everything.” – former Boeing Managing director David Gray, (Thomas,

1997).

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8 BIBLIOGRAPHY

Baker, R. (2007, July 9). The Hornet's nest - In Depth. The Age.

Bauer, E. E. (2008). Boeing: The first century and beyond. Washington: TABA

Publishing.

Boeing Australia. (2012, January). Overview of Boeing in Australia. Retrieved April

10, 2012, from Boeing Australia: http://www.boeing.com.au/ViewContent.do?

id=29982&aContent=Overview

Boeing Company. (2012, January). Boeing In Brief. Retrieved April 10, 2012, from

Boeing Company: http://www.boeing.com/companyoffices/aboutus/brief.html

Corners, A. -4. (Director). (2007). Flying Blind: [Motion Picture].

Georgetown Journal of International Affairs. (2003, Winter/Spring). Expanding

Horizons: Boeing's Global Business Operations. Georgetown Journal of

International Affairs, 49-56.

IBISWorld Company Report. (2010). Boeing Australia Holdings Pty Ltd. Melbourne:

IBISWorld .

Kelly, E. (2008). Boeing boosts presence down under with Phantom Works Australia.

Flight International.

Kelly, E. (2008). Boeing is no Phantom in Oz. Flight International, 34.

Pelletier, A. (2010). Boeing: The Complete Story. Somerset: Haynes Publishing.

Qantas. (2012). The Qantas Story. Retrieved April 18, 2012, from Qantas:

http://www.qantas.com.au/travel/airlines/history/global/en

Sloan, S. (2012, March 22). Boeing Aerostructures Presentation. (D. Chipperfield,

Interviewer)

Thomas, I. (1997, February 17). Australia is in pilot's seat for Boeing's push into Asia.

The Australian Financial Review, p. 5.

Trimble, S. (2010, June 15). Boeing recovers Down Under. Flight International.

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Walker, D. (1995, April 19). Rockwell To Expand Aerospace. Sydney Morning Herald,

p. 39.

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boeing_rev1_2012-4-5

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