Jeremy Bogaisky | Forbes Staff
Aerospace & Defense
Deputy editor for Industry; eyes on the skies
Since the grounding of the 737 MAX following the second of two deadly crashes in March, Boeing has sought to keep the production line moving and to minimize disruptions to the intricate web of smaller companies it relies on to supply roughly 80% of the components to make up its best-selling plane. However, with the Chicago-based company’s hopes dashed of winning approval by year-end for the 737 MAX to return to service, it has decided to halt assembly of the plane in January.
That could have far-reaching consequences for Boeing’s suppliers depending on the duration of the production freeze. The company didn’t address how long it could last.
“The decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft,” the plane maker said in a statement Monday evening.
No layoffs are planned. The company said that the 12,000 workers at its Renton, Washington, factory will continue 737-related work or will be temporarily reassigned to other factories in the Puget Sound area.
Layoffs or furloughs could be forthcoming, however, at some suppliers. Among those that could face the greatest stresses are its aerostructures supplies, chiefly Spirit AeroSystems, which makes the fuselage for the 737 MAX, analysts say.
The airframe is the largest portion of a plane, but building it is one-off work, with none of the highly profitable maintenance and repair sales that suppliers of other components enjoy. And smaller aerostructures suppliers have been less financially stressed as they tooled up to prepare to raise production of the 737 MAX while Boeing stretched out payment terms to 90 to 120 days, says Kevin Michaels, a consultant with AeroDynamic Advisory.
If it’s more than a one-month production pause, “Boeing and Spirit would need to be prepared to intervene to make sure small, vulnerable suppliers are there on the other side of this,” he says.
