Zodiac Aero factory blast shows risks in supply chain

BY ALWYN SCOTT AND CYRIL ALTMEYER

Zodiac Aerospace said it is considering moving machinery from a U.S. factory crippled by a powerful explosion on Tuesday so it can continue making aircraft interior composite panels needed by the booming aviation industry.

Zodiac has "buffer inventory" it can use in the short term, a spokesman told Reuters on Thursday. But in the longer term, "it is not known yet whether Zodiac will be able to produce panels internally or would have to buy them externally," the spokesman said.

The blast at the plant in Newport, Washington, on Tuesday night fractured concrete pillars, blew out windows and caused a floor to collapse, making the building unsafe to occupy, authorities said.

The damaged plant makes "prepreg," a thin resin-soaked sheeting that is glued to either side of a thicker honeycomb core to make rigid wall panels for lavatories, galleys and other aircraft interior sections.

Boeing Co said it was working closely with Zodiac to reduce any impact from the shutdown on its aircraft assembly operations. Airbus did not respond to requests for comment.

Still, concerns about the closed Zodiac facility, one of more than 30 it has in the United States, reveal how vulnerable the aircraft industry is to disruptions in the overall supply chain.

Boeing and Airbus are churning out more than 100 jetliners a month, a record pace aimed at reducing their eight-year order backlog.

Their assembly plants rely on a steady, just-in-time flow of millions of parts shipped from thousands of suppliers around the globe. Some parts come from only one or two suppliers.

Zodiac's prepreg factory supplies at least five other Zodiac factory facilities in Washington state and California that make seat shells and cabin interiors. Earlier this year, Zodiac failed to deliver seats on time, causing late deliveries of Boeing and Airbus aircraft and a profit warning from Zodiac.

Plane makers Bombardier and Embraer, also were hit by Zodiac's earlier stumble. Bombardier said Thursday it did not expect production of Q400 turboprop and CRJ planes to be affected. Embraer said it was trying to verify Zodiac's damage, "at which point it will be possible to evaluate the potential impact on production."

Industry sources said Zodiac could face difficulty obtaining prepreg from other suppliers or moving machines to produce it elsewhere. The resin mixture and machinery are typically proprietary and any changes could require that the products be certified by aviation authorities, the sources said.