Boeing Supplier to Lay Off 2,800 in New Risk for 737 Max Future
Boeing Supplier to Lay Off 2,800 in New Risk for 737 Max Future
(Bloomberg) -- Boeing Co.’s largest supplier for the grounded 737 Max is laying off 2,800 employees, potentially complicating the future of the planemaker’s best-selling jetliner.
Spirit AeroSystems Holdings Inc. said the job cuts are needed to reduce costs as Boeing prepares to halt output of the Max indefinitely. Once Boeing production starts up again, production of the Max will probably be lower than in 2019, Spirit said by email Friday.
Spirit’s move signals that the company, which makes 70% of the narrow-body jet’s structure, expects a lengthy suspension in production. The supplier had continued to make parts for the aircraft after a global flying ban began in March after two fatal crashes. Spirit currently has 100 Max shipsets in storage.
The layoffs indicate the worsening impact of the grounding on the U.S. economy as well complications that will face Boeing as it looks to restart production amid the tightest U.S. job market in decades. The planemaker had held Spirit to the pre-crash production rate until December, when it decided to shut down the final assembly line with more than 400 undelivered jets in storage and no clear timeline for gaining clearance to resume flights.
“The difficult decision announced today is a necessary step, given the uncertainty related to both the timing for resuming 737 Max production and the overall production levels that can be expected following the production suspension,” Spirit Chief Executive Officer Tom Gentile said in the statement.
What Bloomberg Intelligence Says
Spirit’s 20% cut to its Wichita workforce signals the airframer is bracing for an extended period of moderated 737 Max production. The move will stem some of the cost impact from the halted 737 output.
-- Douglas Rothacker, aerospace analyst
Read the note
Spirit fell 1.9% to $71.42 at 11:54 a.m. in New York. Boeing dropped 1.6% to $331.
The layoffs will hit employees at Spirit’s factory in Wichita, Kansas. The supplier also plans smaller cuts at Oklahoma plants in Tulsa and McAlester. Employees could be recalled in the future if Max production rises enough, Gentile said.
The Max accounts for than 50% of Spirit’s sales, and the company provides such components as the fuselage, engine pylons and wing components.
Spirit has been looking to increase its role as an Airbus SE supplier and agreed in October to buy a Bombardier Inc. factory in Northern Ireland that makes wings for the European planemaker’s A220 jet.
To contact the reporter on this story: Brendan Case in Dallas at bcase4@bloomberg.net
To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson
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