Trip to India - Entry 22 - Boeing

I finally learned at Boeing how it works when an American company wants to sell/do major business in India. Boeing, if it gets certain contracts, incurs contractual counter trade obligations. So, if they get, for example, a contract to make fighter jets, a certain percentage of the jet (or increasing numbers of parts of the jet, or all of it) will be made in India.

Some interesting points of note:
- In 2008, India's airways sustained a loss of $2billion (compared with $9billion worldwide)
- The air freight market is so tough to get into that the big players essentially have it sewn up in India, and trains are considered good enough. This reminds me of the difficulties that air freight is having in the US - people have decided that the boring old Postal Service can get their packages delivered just fine, even if more slowly
- The India center is an R&D center - thus, if something is developed entirely there, then it falls under Indian regulatory laws, not US law about exporting certain sensitive information
- The Boeing representative who spoke to us was very positive about the future of air travel in India, although I doubt that it is as rosy a picture as he would like it to be. Right now, because of the recession, demand is down in the US and Europe for fossil fuels, leaving more room for growth in India and China. As soon as demand goes back up, so will price, which makes alternatives to air travel more attractive

The Boeing 787 is an example of global outsourcing. The floor beams are made by Tata in India, which are then shipped to Romania to be put into the body, which is then flown to the States to be assembled along with all the other parts from all over the world. I think that this is an interesting case study (as is the A-380) why outsourcing everything is probably not the most effective and efficient solution to a problem. I thought it was funny when one of my colleagues asked about the quality of items arriving to be used in the airplane, and the speaker said, "Oh, you mean how many parts get "dropped in the ocean" on the way over?" I can understand the desire for a very lucrative deal, but it seems like there is a lot of cost incurred when you're paying for the same part multiple times because your outsourcer messed it up. It would also seem to me that you would have greater difficulty monitoring the quality controls if you have to travel to a plant to check up on them, as I've heard that this gives them time to prepare the "visitor" version of the plant and materials. I'm sure that outsourcing the initial production would save money. I can't imagine building something twice saves anyone money.