Remember Boeing's (BA) 787 Dreamliner -- the $166 million, 250- to 330-seat passenger aircraft with 865 orders and an estimated $150.6 billion backlog? Unfortunately, Boeing just announced it was delaying delivery to Japan's All Nippon Airways from December 2010 to sometime in the first quarter of 2011.

This is the seventh delay in a program that is already three years overdue. The previous deadline for ANA delivery was November 2009.

Back in July, Bloomberg reported that Boeing was likely to miss the December deadline, "as flight-test delays accumulate." But Boeing CEO Jim McNerney denied that there would be a seventh delay, even though 787 program head Scott Fancher said the flight would be delayed because of improperly installed tail parts made in Italy by Alenia Aeronautica SpA, according to the Wall Street Journal.

On Friday, the announced delay was attributed to Rolls-Royce, maker of the engines. Unfortunately, those $17 million Trent 1000 engines shredded during testing. The Journal reports that on Aug. 2, while the engine was being tested at a Rolls facility, it "suffered a major 'uncontained' failure, which did significant damage to the engine and the casing that houses it."

As I described in my book, You Can't Order Change, Boeing built the 787 in a fundamentally new way, without adequately anticipating problems with the new approach. Boeing decided to outsource 60% of the design and manufacture of the aircraft, and it made it out of a composite material that hadn't previously been used for large aircraft. In the past, Boeing had outsourced only aspects of manufacturing, not design, and it had used aluminum instead of composites.

While this new approach saved Boeing in up-front investment -- since its partners shoulder the cost of design until Boeing customers take delivery -- it put the burden of satisfying tight delivery deadlines on suppliers who have not previously proven themselves to be reliable. When push came to shove, many of those suppliers failed.

Furthermore, since the composite materials used in the 787 had not been used in an aircraft of that size, engineers were unable to develop software models to predict how the plane would handle the stresses of flying. This led to some unpleasant surprises, such as the discovery of cracks where the wings attach to the fuselage.

Boeing claims the new delay won't cost anything. But it seems to me that the company's credibility is shredded, just as surely as those Rolls-Royce engines.

Increase your money and finance knowledge from home

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »