ARTICLE

March 2004

Local Investment in Osprey Pays Off by Creating Jobs

by Frank Colucci

A unique arrangement between the city of Amarillo, Texas, and the manufacturers of the V-22 Osprey offers a case study in how local economies can gain defense industry jobs and possibly help military programs cut costs.

Under the agreement, Amarillo financed and built an advanced manufacturing facility, called the Bell Assembly and Integration Center, and leased it to Bell Helicopter. Bankrolled by a half-cent city sales tax, the Amarillo Economic Development Corporation (AEDC) bought the land and put up the factory. The cost of Bell’s lease is determined by the number of local jobs generated at the factory. “Every person Bell brings on board reduces their lease payment,” explains AEDC vice president Steve Pritchett.

By the end of 2003, the facility had around 700 employees logging productivity about a third better than average aerospace manufacturing standards, he adds. The combination of a productive workforce and additional facilities paid for by the AEDC led Bell to grow the Amarillo facility for the Marine Corps’ AH-1Z/UH-1Y helicopter upgrade.

At the groundbreaking ceremony for the expansion, Marine Deputy Commandant for Aviation Lt. Gen. Michael Hough called the Bell-Amarillo partnership “a model for the rest of the industry to emulate.”

The first H-1 upgrade kit arrives in Amarillo this August. When both the V-22 and H-1 programs attain full rate production, and commercial tilt rotor deliveries ramp up, the Assembly and Integration Center will deliver around 100 aircraft per year and employ more than 1,700 people. “For a community of this size, that’s a very big deal,” said Roger Williams, Bell’s director of administration.

The Defense Department plans to build 360 Marine MV-22s, 50 Air Force CV-22s, and 48 Navy HV-22s, to be delivered by 2013. Production rates, however, could change if budgets are cut or programs run into trouble. Marine squadron VMX-22 is training at New River, N.C., on Block A production MV-22s for operational evaluation starting in November.

A full-rate production decision by the Defense Acquisition Board in 2005 could ramp up V-22 output from 11 to 48 aircraft a year. (The current plan peaks at 36 aircraft per year in 2008.)

Bell Boeing officials said they expect to trim the cost of each aircraft from $74 million to $58 million by 2010.

The company is producing 11 V-22s a year. The projected savings, company officials said, will come from design improvements and lean manufacturing techniques. Productivity measures are expected to cut cycle time per aircraft from around 38 months now to 24 months by 2008.

Bell and Boeing share the Osprey work. Boeing fabricates and assembles the fuselage, landing gear, and avionics. The company operates a $30 million 160,000 sq. ft. V-22 factory south of Philadelphia.

Bell manufactures Osprey wing, drivetrain, prop-rotor, and nacelle parts in Fort Worth, Texas, and makes five gearboxes for each tilt-rotor in Grand Prairie, Texas. By the time the V-22 reaches full rate production, Bell will have invested $200 million to $300 million in a “Composite Center of Excellence,” in Fort Worth and a “Machining Center of Excellence,” in Grand Prairie.

The big tail and fuselage structures come from Vought Aircraft, in Tennessee and Georgia. The engines are from Rolls Royce, in Indiana, the infrared suppressors from Honeywell, in California, and other subsystems are shipped from smaller suppliers across the United States. The pieces all come together at the Assembly and Integration Center in Amarillo.

The 60,000-pound V-22 is the biggest, most complex and most expensive aircraft ever built by Bell Helicopter. As the program advanced from development to low-rate production, program officials realized they needed more assembly space. “We recognized we simply did not have enough facilities in Fort Worth for something the magnitude of the V-22,” said P.D. Shabay, executive vice president for administration at Bell Helicopter.

Bell set out in early 1998 to find a locality that would share the cost of a new facility. A similar arrangement in the early 1980s led to the Bell Commercial Assembly Center Of Excellence in Mirabel, Canada. In that case, the Canadian government identified the factory site.

Bell asked about 1,200 municipalities whether they were interested in an assembly facility and around 1,000 skilled employees. The bipartisan Texas Tilt-Rotor Coalition in Congress soon focused the competition on eight Texas towns.

Arlington, Austin, College Station, Dallas, Fort Worth, San Antonio, Waco, and Amarillo all offered space, people and incentives. “I was very convinced no one could beat Fort Worth,” recalls Shabay. A new facility near the existing Bell plant would have minimized moving expenses. However, the winning package from the AEDC promised to save Bell and the V-22 program $60-$75 million.

With a population of 175,000, Amarillo’s single biggest employer is the Pantex nuclear weapons maintenance plant. The regional economy is based largely on farming and oil. However, the AEDC has attracted a mix of manufacturing, distribution, and service companies with various incentives.

The Amarillo International Airport was a Strategic Air Command base from 1951 to 1968 and offers 13,500-foot main and 7,900-foot crosswind runways strengthened for the heaviest cargo aircraft. V-22 fuselages leave the Boeing plant via Philadelphia International Airport on Air Force jet transports—one to a C-17 and two to a C-5. About 60 percent of Amarillo airport operations are military (B-2 bombers practice touch-and-go landings on the long runways), and the city agreed to provide logistics areas for the C-5s.

Seven miles outside of the city, the Amarillo airport sits beside 3,500 acres of real estate available for industrial development. The AEDC offered to buy up to 184 acres, build a $32 million facility to Bell specifications and lease the complex to Bell for 20 years. The lease terms have been amended with the facility expansion, but at the end of the lease, the rotorcraft manufacturer will own the factory for $1. Bell received 100 percent tax abatements on buildings and equipment for 10 years, and about $8 million in telecommunications and other infrastructure improvements. The AEDC also covered about half of the Bell moving costs associated with the new facility.

Workforce Training
Another contributing factor was Amarillo’s offer to provide a training program at the local college. A single blind ad in local newspapers calling for aerospace manufacturing workers drew 8,000 replies. Many of the applicants had prior military or relevant industry experience. Bell had run a helicopter battle-damage repair facility in Amarillo before the flow of Vietnam-damaged Hueys and Kiowas dried up.

In competition with Fort Worth, Amarillo offered a non-union workforce with lower labor rates in a region with a lower cost of living. This drew protests from organized labor leaders. Shabay says the employment of non-union workers was not a key deciding factor. “What we were looking for was tax abatements, land, and buildings.”

Bell extended its union agreements in the Fort Worth area, and each hour of work in Amarillo today is matched by 2.5 to 3 hours work in Fort Worth. Average hourly pay rate for Amarillo assembly workers is $18.18 an hour, and a senior electrician makes $25.50 an hour. Team-based incentives to meet delivery schedules and safety objectives pay up to $500 per quarter.

To provide a pool of qualified candidates, the Bell Employee Training Alliance—including Amarillo College and several regional employment agencies—offer courses in shop mathematics, quality procedures, composite materials repairs and metalworking. Students pay $700 for 500 class hours. Although all graduates are assured a Bell interview, only about half are actually hired. “The fact that they completed the course doesn’t in any way guarantee them a job,” says Pritchett, of the AEDC.

For successful applicants, the first-phase training is followed by more than 80 hours of training in mechanical and electrical assembly. Phase II courses are taught by Bell training staff.

Bell hired its first Amarillo employees in 1999. Workforce performance on the V-22 program has received high ratings. Absenteeism in Amarillo is about 1 percent—less than a third of the level encountered in other aerospace manufacturing operations.

Bell officials say the company is determined to retain the skilled workforce. No Amarillo employees were laid off when the V-22 was grounded in 2001. “You hate to see them go, because you’ll never get them back,” notes Williams. By 2009, about 50 percent of the Amarillo workforce will have more than five years with Bell Helicopter, and 20 percent will be 10-year veterans.

Though aware of Bell plans, the Marine Corps and Naval Air Systems Command did not insist on approving the tilt-rotor assembly site. “Their major concern was, ‘Can it be done?’ says Shabay. “In the beginning, there were some questions about Amarillo ... Now, I’m not sure you could find bigger fans of Amarillo than the Marines and the Navy.”

The assembly building construction began in November 1998, and the first Osprey was delivered one year later. By December 2003, the factory had delivered 42 MV-22s.

Sized for V-22 full-rate production, the Assembly and Integration Center includes a 170,000 square foot assembly building and a 72,000-foot flight hangar. A 113,300 square foot expansion now under construction will initially house both V-22 and H-1 assembly lines and should be finished by October. Another 58,000 square feet will accommodate the H-1 line displaced by V-22 full-rate production.

The Marine Corps expects that 180 AH-1Zs and 100 UH-1Ys will be rebuilt in Amarillo by 2014. Bell already plans to build the BA609 commercial tilt-rotor at Amarillo, and may locate other production lines in its Center of Excellence. At Bell’s request, Amarillo received Foreign Trade Zone status, so parts can be imported into the United States and exported on finished aircraft duty-free.

To ensure the adoption of lean manufacturing principles, Bell retained total control of the building design. The bright, climate-controlled factory has under-floor power, air and data lines to keep the work area uncluttered. Manufacturing flow simulations reduced the number of expensive overhead cranes, and trimmed the size of the current expansion from 172,000 to 113,000 square feet.

V-22 fuselages are flown into Rick Husband Amarillo International Airport (named after the Columbia Shuttle commander and native son) while wings, tails and other pieces are trucked in from their manufacturing locations.

The tilt-rotor assembly building has wing, nacelle and prop-rotor assembly areas arrayed beside four major control points where tilt rotors get their wings, nacelles, and electrical and hydraulic systems. The large Osprey prop-rotors are now installed in the flight hangar, but will become part of the major assembly steps in full-rate production. A fifth major control point in the assembly building now is filled by the CV-22 “additional test asset,” an early model MV-22 torn down for modification and due for delivery in November 2004.

Like Boeing assembly teams in Philadelphia, Amarillo workers receive point-of-use hand tools in shadow-boxed kits. “It’s like a racing pit crew,” says Bell’s Rob Penrod. “When the car comes in, everything they need is laid out right where they need it.”

The company follows the Six-Sigma business principles to reduce manufacturing waste and cost. Careful attention to drilling fixtures, cutters, and drilling feeds and speeds, for example, has reduced the number of defective holes drilled in wing skins from the usual 5 to 8 percent, down to 0.5 percent.

Bell has implemented the CIMx Apps® manufacturing management system at Amarillo. The program helps manufacturing engineers equalize assembly crew loading and generate work instructions within programmed tooling, component and labor constraints. It also maintains a master assembly plan to build any V-22 and generates orders to turn specific tail numbers into MV-22s, CV-22s, or other versions.

To get the system on-line quickly, Amarillo assembly teams still receive their instructions on paper rather than shop floor computer displays. “We’re looking at how we can get that to electronic deployment,” says Penrod.

V-22s move from one control point to the next on the pulsing assembly line every 18 days. The pulse rate will pick up to 14 days by Aircraft 71 and 10 days by Aircraft 131.

Aircraft 50, the first V-22 made from scratch to current Block A production standards, took 385 days to assemble. Aircraft 131 should take 206 days.

At the Amarillo flight operations hangar, fully equipped V-22s go through acceptance tests, fuel system tests, auxiliary power unit run up and ground run tests. The hangar has four aircraft completion positions circling a “Ring of Fire,” a central bank of computer workstations where program managers gathered during those bleak days when the Osprey was grounded. The computer workstations are now used by inspectors, supervisors and process specialists to track production, and by assembly workers to enter their job time.

Within the tilt-rotor team, Boeing is responsible for development test flying and Bell is responsible for production testing. Company flight tests at Amarillo last about two weeks. “You’d like to get that down to less than a week,” says Penrod. “We’re being very cautious. Our focus is the operational capability and safety.”

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