By Dominic Gates | Seattle Times aerospace reporter
With production of Boeing’s 737 MAX halted last month, hundreds of aerospace suppliers in Washington state are struggling to hold on and avoid layoffs, banking on private indications from Boeing that it hopes to restart ordering 737 parts next month.
The smaller suppliers are the most vulnerable. With their income from Boeing slashed, they need to have cash on hand to keep going.
Some that depend on the MAX for the majority of their work and their income have cut workers despite the challenges of re-hiring in a generally hot economy.
They have plenty more to worry about. At the annual Pacific Northwest Aerospace Alliance (PNAA) suppliers conference in Lynnwood this week, attendees expressed concern about the near-term impact of the coronavirus on the airline industry, as well as a sharp, longer-term economic slowdown in China, which in recent years bought 1 out of 4 Boeing jets sold worldwide.
Still, the main topic of conversation was local: the uncertainty over how long the MAX will stay grounded. One supply-chain expert told the group Boeing is unlikely to return to its previous 737 production rate until late next year, which would spell a two-year recession for parts suppliers reliant on that jet.
MAX-related job cuts have already hit hard in Wichita, Kansas, where Spirit AeroSystems, which supplies the jet’s fuselages, has laid off 2,800 people, and layoffs have rippled out to Spirit suppliers.
But in Washington state, Boeing itself has held onto its workers, transferring about 3,000 direct 737 assembly-line employees to work on other programs or on maintenance of the grounded MAXs. And so far, the number of layoffs at its suppliers is also small.
The work at such suppliers is typically very hands-on, so many companies are keen to avoid losing skilled employees.
Jin Prowse, CEO of Prowse Manufacturing Group, which employs 28 in two machine shops in Arlington, said that though the bulk of the work is for 737 parts, she’s holding onto employees. They are working through a backlog of parts orders while using the slowdown to get more efficient by upgrading work processes and systems.
“I don’t want to let employees go. You want to make sure you have good talent and hang onto them,” said Prowse. “We’re taking advantage of this time to get stronger.”
She said Boeing has indicated the 737 shutdown will be about a month. Her company can cope with that, even if production restarts slowly and at lower volume than previous levels.
However, she said, “If it’s longer duration, that will impact shops like ours.”
Some other suppliers have already made job cuts.
Triumph Group in Spokane, which produces floor panels and duct work for the 737, transferred some workers to other programs, including work for Airbus. On Thursday, CEO Daniel Crowley in an earnings call said Triumph hasn’t shut down its 737 work but is maintaining a reduced rate, producing parts for 21 jets per month.
Still, in late January Triumph laid off 22 of its about 290 Spokane employees. A person with knowledge of the plans said Triumph could hire those people back when MAX production restarts.
This week, Senior Aerospace AMT in Arlington, which makes structural parts for airplanes, handed out layoff notices to 72 workers. According to filings with the state, that plant at the end of 2018 employed 728 workers.
An official at the company declined to provide details but said the layoffs were because of the MAX, and the company hopes to hire the workers back later. Separately, Senior, headquartered in the U.K., has suspended plans to sell its aerostructures unit “because of the uncertainty surrounding the 737 MAX,” according to the Wall Street Journal.
About a third of the work at Orion Industries, a small nonprofit with a social mission to train and provide work for disabled people, is making parts for the 737. Avoiding the word “layoff,” Orion vice president Tom Brosius said he has furloughed workers at the plant in Mukilteo and expects to get those employees back to work as soon as Boeing starts ordering parts again.
Even aerospace companies that retrofit equipment for all the earlier model 737s still flying around the world are indirectly affected by the MAX shutdown.
Joe Clark, chairman and founder of Aviation Partners Boeing, which supplies fuel-saving winglets for the earlier 737 model, said demand has temporarily dropped because airlines are so short of capacity they cannot afford to take those 737s out of service to get his winglets fitted.
Likewise, Peter Gundermann, CEO of Astronics, a supplier of avionics and inflight entertainment systems, said in an investor update this week that the ongoing 737 MAX grounding affects his business not only because Astronics isn’t delivering its equipment for new MAXs, but also because the retrofit market to refurbish cabin interiors has slowed with airlines “reluctant to take planes out of service to install the types of products they buy from us.”
MAX recovery will be slow
At the PNAA conference, Kevin Michaels, as supply-chain specialist and managing director at AeroDynamic Advisory, laid out the reality that even after Boeing is cleared to fly the MAX again, production will take a while to restart and will ramp up very slowly.