After fumble, Spirit says next 737 rate hike will ‘ironically be the easiest for us’

Spirit AeroSystems CEO Tom Gentile said at an investor conference on Thursday that he’s optimistic the Wichita aircraft supplier has moved past its problems delivering 737 fuselages to Boeing on time.
Spirit AeroSystems CEO Tom Gentile said at an investor conference on Thursday that he’s optimistic the Wichita aircraft supplier has moved past its problems delivering 737 fuselages to Boeing on time. Courtesy photo

Despite falling behind in Boeing 737 fuselage deliveries earlier this year, Spirit AeroSystems’ chief thinks moving to even higher production next year won’t be as problematic for Wichita’s largest employer.

“Going to 57 ( fuselages a month) is ironically going to be the easiest transition for us,” Spirit CEO Tom Gentile said.

Gentile’s remarks came Thursday at Morgan Stanley’s annual Laguna Conference for investors in California, where he addressed Spirit’s delivery stumble in the first quarter of 2018 and what the prospects are for the company as it looks at another fuselage rate increase in 2019 — its highest ever.

Gentile said a confluence of things led to the aircraft supplier missing deliveries of its biggest product in the first three months of the year. As it was adjusting to moving from deliveries of 47 to 52 a month to Boeing, it was doing so at the same time it was building two different variants of the plane: the Next Generation and the newer Max.

Last year was the first year Spirit began building the 737 Max for Boeing, which Gentile said is “35 percent different” from the older NG model. “And all these aircraft are going down the same lines in our factory, but it requires some different skills and some different approaches, different work instructions, different processes, different tools, different parts,” he said. “So there’s a learning curve.”

Boeing’s rate adjustments also meant strains on the suppliers of 737 parts to Spirit, he said, leading to shortages.

“We have more than 20,00 parts on our 737 fuselage but one can shut you down,” Gentile said.

He said more than 1,300 of those parts Spirit had to either bring in-house to build itself or hire one or more additional suppliers to manufacture.

“That gives us the security of supply,” Gentile said. “We’ve done that now on over 1,300 parts so it’s been a pretty big effort. But that’s alleviated a lot of the shortages so we have parts flowing.”

He said the help Boeing brought in to help Spirit get back on schedule was mainly industrial engineers and “experts” in production and supply — including some Boeing retirees from Wichita.

“They went through the last transition from classic to the NG, so they’ve been through this before,” Gentile said. “They’ve been very useful. Now that we’ve found them we may not give them up. “

Gentile said he’s optimistic about how Spirit will handle the next rate adjustment in 2019 because of the way fuselages will flow on Spirit’s three 737 production lines.

For several years, he said, Boeing had a 737 production rate of 42 airplanes a month. At Spirit, it had two production lines for the 737, each producing 21 fuselages a month, or one a day.

“We were there for almost five years, so the workers got very used to it, very accustomed to doing their one day of work,” Gentile said.

When Boeing made its first 737 rate increase to 47 a month last year, Spirit added a third production line that was building a fuselage every fourth day.

“So now you had people doing Max work, which was different, and also working at a different pace,” he said. “So it created more disruption.”

This year, Boeing adjusted the rate to 52 a month.

Next year, when Boeing adjusts the rate to 57, Gentile said, Spirit will have three lines producing 19,737 fuselages — and increasingly more of them for the Max.

“So we’ll be more balanced next year than we’ve been in a long time,” he said. “And that’ll drive productivity and efficiency.”

He added Spirit has already begun hiring production workers for the rate increase to 57, which is earlier than in .past rate increases.

Last December, Spirit announced an expansion plan that included hiring an additional 1,000 mostly production workers in Wichita.

The company has hired about 1,300 employees since January, including for positions that were not part of the expansion plan. It has about 12,500 employees in Wichita.

The hiring of production workers earlier for the next rate increase will give Spirit “more people to help us with our current production, and we have longer to train them,” Gentile said Thursday.

“So I’m very confident and optimistic that the transition to 57 will be our best rate break in the last three.”

Jerry Siebenmark: 316-268-6576, @jsiebenmark