Spirit AeroSystems said it plans to stay the course on its 737 Max production rate for now, in the wake of a comment from Boeing’s CEO that the company will consider temporarily shutting down the plane’s production if its return is significantly delayed beyond the company’s October forecast.
“Spirit continues to work with Boeing to assess this ongoing situation. We are committed to working to minimize any impact to our employees as we work together through these challenges,” Spirit spokeswoman Keturah Austin said by email.
“Spirit is maintaining a production rate of 52 airplanes per month on the 737 MAX.”
The comment by Boeing Chairman and CEO Dennis Muilenburg, which underscores the uncertainty swirling around the company and its best-selling plane, comes a little more than a month after Spirit moved thousands of salaried employees to a shorter work week to help ease mounting costs following the Max’s worldwide grounding in March after two deadly crashes.
In June, Spirit announced that about 6,000 workers — roughly 90% at its Wichita plant and the rest in Oklahoma — would start working a 32-hour week instead of the typical 40 through Aug. 29.
The mandatory move means 20% less pay for the affected employees. In April, Spirit began reducing overtime and the use of contractors and suspended hiring to backfill open positions to further cut costs associated with the troubled plane, about 70% of which is made by Spirit.
Boeing reported Wednesday that it suffered its biggest quarterly loss in at least two decades, nearly $3 billion, as it absorbed financial damage caused by the Max. Revenue plunged 35% after Boeing halted deliveries of any new Max jets.
The huge second-quarter loss was expected. Boeing removed much of the suspense from earnings day when it announced last week that it would take a $4.9 billion after-tax charge for the Max. The charge was calculated from Boeing’s estimate of the cost of compensating airlines for lost use of their Max planes for several months. It did not include Boeing’s potential liability from dozens of lawsuits filed by relatives of the 346 passengers who died in the two crashes.
Boeing is updating U.S. and foreign regulators daily on its work to fix the plane. Based on those discussions, the company said last week that it expects the Max to resume flying early in the fourth quarter.
The Max assembly line near Seattle has stayed open, although at a reduced rate. The company even hopes to boost production gradually from the current 42 a month to 57 a month next year, but that assumes the plane will fly and Boeing will soon resume deliveries to airlines. Jets have been piling up in Boeing lots since March.
Spirit, for example, has worked out a deal to store extra planes until Boeing is ready for them so the company could maintain its current production rate of 52 Maxes a month. At whatever point Boeing’s production rate increases, Spirit wouldn’t match the rate until it “burns down” the overflow that’s in storage, Spirit CEO Tom Gentile said earlier this year.
“If that estimate of (an October) return to service substantially changes, then we’ll have to consider alternatives,” Muilenburg told analysts. “Those alternatives could include different production rates, they could include a temporary shutdown of the line.”
Muilenburg’s comments implied that the Federal Aviation Administration can review the company’s changes to flight-control software in one month. The FAA has already been analyzing much of Boeing’s work. An FAA spokesman said the agency has no preconceived timeline for returning the Max to service, and will do so only when it determines that the plane is safe.
The grounding of Boeing’s plane has caused airlines including American, United and Southwest to cancel thousands of flights into early November. A pause in Max production would hit Boeing assembly workers and the company’s suppliers.
Contributing: The Associated Press