Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Timna Tanners - UBS.
Timna Tanners – UBS
I wanted to ask you about the jet engine destocking, and if you can give us whatever color you might have. I know you and also some of your peers are also talking about this, but what gives you the conviction that this destocking is near an end? What can you tell us more in detail about that?
Pat Hassey
Just some anecdotal kind of things. I think that there has been some disconnect between the airframe build for 2010, and what might be the conjecture of some prime suppliers as to the number of aircraft that’ll be built next year, so two things are happening.
One is that Boeing again today reiterated that the 2010 build rates are unchanged and firm for the single aisle, which is a major factor, and also that their schedule for the 777 is on schedule. They’ve also confirmed that the 787 should fly before the end of the year. Those are all very good things, because as you get down to normal lead time changes, these kinds of things have to be set and schedules have to be concurrent, I would say before the end of the year.
So we know there’s been some disconnects in what should I stock, how much should I be buying, what are really going to be build rates, and I think those rates are coming to an end, and the jet engine makers will see a firm schedule, and we’ll get a concurrent schedule. Once they get that in place, then you’ll look at the lead times that are being offered in the industry and also the amount of material on the shelf; that’s one point.
Second point I think is, that we’ve seen some outages. We’ve seen customers coming to us and asking for some relatively short deliveries to fill in holes, where they have seen some changes or have taken the inventories down too far. So I think two things are happening, those two things.
In response to those two things, we are putting inventories in forward positions to be ready to respond to this market, and we would say that we don’t see that this thing is certainly going to end in the fourth quarter, but as we move into the first quarter, we see improving shipments and then we see growing shipments throughout the rest of the year.
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