By Sharon Terlep

SEATTLE -- Ihssane Mounir stood before the skeptical and anxious crowd filled with hundreds of manufacturers whose fortunes rise and fall with Boeing.

The Boeing executive ticked off a list of accomplishments -- fewer defects and more frequent supplier updates -- since he had addressed the group last February, weeks after a door-plug blew off an Alaska Airlines jet. Despite the progress, the supply chain guru confessed a fundamental problem.

"We're selling more than we can build," he said.

Boeing is promising this year to get its jet production to precrisis levels and chip away at a growing backlog of orders. First, the manufacturer needs to clear out the dozens of planes in its shadow factories.

A shadow factory is what Boeing executives call a production line where engineers and mechanics work on fixing, maintaining or updating aircraft instead of building new ones. They exist for the company's two-bestselling models, the 737 MAX and 787 Dreamliner.

As Boeing is struggling to hire and train enough machinists, the shadow factories can occupy some of the company's most experienced workers. In some cases, Boeing spends more hours inspecting and reworking planes than it did to produce them in the first place.

"It seems like 30% of everybody's job is fixing something that's bad quality or late product or something that shouldn't have happened," CEO Kelly Ortberg told employees last year at his first town hall meeting.

Boeing burned through $14 billion last year. It built far fewer planes, first because of quality problems that slowed its production lines, then when a machinist strike stopped work for about two months. Ortberg aims to reverse its cash burn this year by pumping out 38 of its 737 MAX jets a month and closing the shadow factories by midyear. Analysts estimate the company produced about 20 in January.

There is also political pressure. President Trump, who has been frustrated by long-delayed replacements for Air Force One, said Wednesday he was "not happy" with Boeing. The following day, Transportation Secretary Sean Duffy said he asked Ortberg to come to Washington, D.C. to discuss quality and safety issues and that he planned to visit Boeing's factory.

"It's been a long journey," finance chief Brian West said in a call last month with analysts, referring to the shadow factories. He predicted Boeing will be rid of its pileup by the middle of this year and doing so will deliver a "massive productivity benefit."

It isn't the first time Boeing has pledged to solve its shadow-factory problem. The company had initially vowed to be rid of it by the end of 2024, but clearing out the planes has proven vexing.

The biggest chunk are MAXs parked at a facility in Moses Lake, Wash. They are mainly remnants of a global grounding of MAX jets following a pair of fatal crashes in 2018 and 2019. Boeing continued making the planes even though airlines weren't taking them, and is still working to deliver them.

Another couple of dozen are 787s sitting in Everett, Wash., awaiting checks to ensure parts of the planes are properly pieced together following quality questions raised years ago around the jet's production process.

A year ago, Boeing estimated it had about 225 jets in the shadow factories. It fell to 115 at the end of 2024, with Boeing clearing out a chunk of planes during last fall's machinists strike.

Not only do the planes take up space and tie up billions in much-needed revenue, they require sophisticated care and reworking, which means some of the company's most skilled machinists are charged with fixing jets rather than with building new planes.

Any time a model requires an update or repair -- a common occurrence in machinery as complicated as a jetliner -- crews must do the relevant work on every unfinished plane. In the fall of 2023, for instance, the company had to repair around 160 737s in the shadow factory after misdrilled holes were found in the fuselage of a completed jet.

Doing away with shadow factories is one of the moves by Ortberg to tackle factory quality problems. The company is adding weeks of education for new hires, freeing up managers to spend more time on the factory floor and simplifying work instructions so they are easier to follow.

Boeing is also working to improve quality at its biggest supplier, Spirit AeroSystems, which made the fuselage involved in the Alaska Airlines blowout. Ortberg said Spirit's work has improved to the point that Boeing has a pileup of pristine fuselages awaiting final assembly, a reversal from last year when a fuselage shortage was slowing Boeing's factories. The plane maker is in the process of acquiring Spirit, which it spun off decades ago.

Stakes are high for the entire industry.

Suppliers, especially smaller shops with thin profit margins, need Boeing to consistently order more parts to keep their factories running profitably. Airlines blame Boeing's slow production for denting revenue and, in some cases, forcing them to cancel routes.

Southwest Airlines CEO Bob Jordan said the company sees progress at Boeing but knows the airline won't get the number of jets initially promised in 2025.

"While they still have much work to do, they appear to be on a good path, " he said on a call last month with investors. "And we are feeling more optimistic."

Write to Sharon Terlep at sharon.terlep@wsj.com

(END) Dow Jones Newswires

February 14, 2025 05:30 ET (10:30 GMT)

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