Spirit AeroSystems to suspend 737 Max production Jan. 1
Spirit AeroSystems said Friday that it will suspend production of Boeing 737 Max jets beginning Jan. 1.
Spirit said in a news release that Boeing had directed it Thursday “to stop all 737 MAX deliveries to Boeing effective Jan. 1, 2020, due to Boeing’s announced temporary suspension of 737 MAX production.” Boeing announced a temporary production halt Monday at its Renton, Washington, plant.
The suspension “will have an adverse impact” on the Spirit’s business, financial condition, results of operations, and cash flows, the company said in the release. More than half of Spirit’s revenue comes from the production of 737 aircraft components. The company, Wichita’s largest employer, makes about 70% of the 737 including the fuselage.
It was unclear exactly what impact the shutdown will have on Spirit employees who work on the Max. In an email sent to workers obtained by The Eagle on Friday, company CEO Tom Gentile said employees on the 737 teams will return to work Jan. 6 after the extended holiday shutdown.
“Even though we will not deliver any MAX shipsets to Boeing, and MAX production will formally be suspended, there will be work during the month to catch up on jobs behind schedule and to work on projects to enhance the stability and quality of our production system,” Gentile wrote. He added later in the email that employees have his “absolute commitment that I am doing everything I can ... to ensure Spirit has a bright future.”
An earlier statement sent to employees by Gentile said there is uncertainty around what the production rate will be in 2020 and beyond.
At the end of last week, Spirit had nearly 90 Max fuselages stored on a tarmac at Air Capital Flight Line — part of a deal the company struck with Boeing earlier this year to continue its current production rate of 52 aircraft per month and store the excess in Wichita while Boeing worked with Federal Aviation Administration regulators to return the troubled jet to flight. That hasn’t happened yet.
The 737 Max was grounded worldwide in March following a pair of deadly crashes that killed a total of 346 people in Indonesia and Ethiopia.
Spirit had already extended its annual holiday break for aircraft workers in Wichita.
Spirit’s the largest employer in the area with about 12,500 employees, according to the Greater Wichita Partnership.
To help mitigate the financial fallout from the Max’s grounding earlier this year, Spirit cut overtime and contractors, froze hiring, offered a voluntary retirement package that about 200 workers accepted, deferred spending on capital improvements and temporarily shortened the work week for about 6,000 salaried employees, most of whom work in Wichita. The company also abandoned a plan to boost 737 Max production to 57 a month this past summer.
Boeing had planned to increase production of the 737 Max when it’s approved to fly again and Spirit had planned to hold production at its current level until the stockpiled fuselages were used up.
Spirit said in Friday’s news release that it plans to continue talking with Boeing about its timetable for resuming production of the jet. The company plans to release more information about the financial impact of the suspension during its fourth quarter/full year 2019 earnings release, it said. The earnings release is expected on Feb. 3.
“Spirit is evaluating all potential actions to align its cost base with lower production levels expected in 2020. Decisions will be guided by a focus on what is best for the long-term interests of Spirit’s stockholders and other stakeholders, including employees,” the news release says.
In his memo to workers, Gentile said he’s been in contact with Kansas Sen. Jerry Moran and Gov. Laura Kelly.
“Both have expressed their support for Spirit and offered the assistance of their respective offices,” he wrote.
A spokesman for the senator said Moranbeen in communication with Boeing and FAA and understand the significance of the Max and recognizes the importance of what it means to Wichita and Spirit
Moran is a member of key legislative panels, including the Appropriations Committee, the Commerce Committee and its Aviation and Space subcommittee.
Moran wants the 737 Max back in production as soon as it’s been determined safe to fly and making sure it’s done right is very important.
Earlier this week, Kelly promised to bring any resources the state can to help Spirit weather the crisis.
She suggested the company and the state could partner in a job-sharing agreement, using state unemployment benefits to help backfill salaries and keep as many Spirit workers employed as possible.
She said it’s critical for Spirit to maintain its pool of trained workers for when production resumes and she’s instructed her secretaries of labor and commerce to work with the company.
Trading in Spirit stock closed Friday at $74.55, down 77 cents from Thursday.
The stock is down about $25 from its 2019 peak of $100.30.
After a steep decline from March through August, Spirit stock had rallied into the low $90s in November on expectations that the problem with the 737 Max would be resolved by the end of the year.
Cornell Beard, the president and business representative for Machinists Union Local 70, did not return a phone message seeking comment.
He issued a statement on the union’s web site urging Spirit workers to “stay positive.”
“Even with the unknown looming over us during the holiday season, we haven’t been given any information regarding the company’s plan going forward,” the statement said. “I haven’t forgotten where I come from and it can be easy to get caught up in the negative possibilities, but we will get through this together.”
This story was originally published December 20, 2019 at 7:18 AM.
