Spirit AeroSystems will lay off 2,800 workers after Boeing 737 Max halt
Wichita’s largest employer, Spirit AeroSystems, announced Friday that it will lay off 2,800 workers due to uncertainty about production of the Boeing 737 Max.
All 2,800 employees work in Wichita. The layoffs will be followed by further cuts later this month at the company’s Tulsa and McAlester, Oklahoma, locations, according to a news release sent out by the company.
Spirit may shed more jobs in the future, the news release said. The 2,800 workers represent more than a fifth of the company’s Wichita work force, according to the Greater Wichita Area Partnership’s most recent numbers.
Hourly workers will start leaving the company Jan. 22 followed by salaried employees, who start leaving the company Feb. 7. All employees will receive compensation for the full 60-day notice period, according to a letter Spirit’s CEO sent to employees Friday.
The Boeing 737 Max has been grounded since March after two crashes killed 346 people in Indonesia and Ethiopia. Boeing has been working to get the jet back in the air and make it safer, but the timeline has been pushed back multiple times as more technical problems have been discovered.
Boeing posted a $3.38 billion quarterly loss last year and stopped production on the planes in December. Spirit, which makes over 70 percent of the Max, halted production at the start of the year.
“Reducing employment is a necessary step given the uncertainty of when production of the MAX will resume and the expected lower production levels when it does resume,” Spirit President and CEO Tom Gentile wrote.
“This is not the news I wanted to share, and I know it’s not the news you wanted to hear,” Gentile said.
Earlier this week, Gentile gave qualified employees the option to take a voluntary buyout, adding that it was “a first step” in cost-cutting measures the company is taking.
“It is an extremely difficult time for the workers at Spirit AeroSystems who have dedicated their lives to making this company a leader in aerospace,” said Cornell Beard, president of International Association of Machinists and Aerospace Workers District Lodge 70 in Wichita.
“Machinists members and their families in this community have some tough decisions ahead of them,” Beard said in a written statement about the layoffs.
Blaming Boeing
The Spirit announcement came the day after hundreds of pages of internal messages between Boeing employees was delivered to congressional investigators Thursday. The messages show Boeing employees mocked federal rules, talked about deceiving regulators and joked about potential flaws in the 737 Max as it was being developed, according to a New York Times report.
U.S. Rep. Peter DeFazio, D-Ore., the chairman of the House Transportation Committee said that the internal messages “paint a deeply disturbing picture of the lengths Boeing was apparently willing to go to in order to evade scrutiny from regulators, flight crews and the flying public, even as its own employees were sounding alarms internally.”
U.S. Rep Sharice Davids, a Johnson County Democrat who is vice chair of the Aviation Subcommittee of the Transportation Committee, said in a written statement Friday that the messages show “a coordinated effort” by Boeing to “deceive the American public and federal regulators.”
“It’s unacceptable that it has taken 10 months of investigations for Boeing to turn over these messages, which are essential to understanding what happened with the MAX,” Davids wrote. “We will continue to push forward with our investigation so we can ensure accountability and most importantly the safety of the flying public.”
“In addition to the public safety concerns these messages raise, Boeing’s callousness has now cost thousands of Kansans their livelihood and endangered the economy of our state, which is dependent on aerospace. Kansas will continue to be an aerospace and technology leader, despite the harmful impacts of Boeing leadership’s reckless decision making.”
Boeing apologized to the FAA, Congress and airline customers for the “completely unacceptable” messages Thursday.
“The language used in these communications, and some of the sentiments they express, are inconsistent with Boeing values, and that company is taking appropriate action in response,” Boeing said in its apology letter, which was posted to the company’s website on Thursday.
Ripple effect
Rep. John Carmichael, a Wichita Democrat, said the effects of the layoffs would extend well beyond Spirit employees to the machine shops, vendors and contractors that assist the company.
“This trickles down and-or has a multiplier throughout the city’s economy,” Carmichael said. “So it is a very serious circumstance when the largest employer in the city announces layoffs.”
On the other hand, Carmichael said the layoffs shouldn’t come as a surprise. Spirit shouldn’t be faulted for the situation, he said.
“The bad judgments that were made appear to be Boeing management decisions, so far as I know, that don’t implicate ether Spirit or the hardworking folks who work at Spirit,” Carmichael said.
Wichita City Council member James Clendenin, who represents the area around the sprawling Spirit plant, said the situation could deteriorate further.
“I’m hearing there’s going to be really a phase one and phase two of layoffs,” he said. “Phase two depends on whether the (737 Max) program can get back up and going.”
Clendenin faced a similar situation himself in 2009, when he was laid off by Beechcraft, where he worked in process improvement.
“I was able to find work, but it was scary,” he said. “You don’t know where your next meal is coming from and you don’t know how you’re going to pay your mortgage.”
He vows that the city will use all its resources to get Spirit workers retrained for jobs in related or other industries.
While aircraft training is the specialty of Wichita State Tech, the vocational wing of Wichita State University, the school also trains workers in other fields such as information technology and computer programming that aren’t as aviation-specific.
“I’m confident that with all of our resources, we’re going to be able to find people jobs,” he said. “We’ve had to weather worse storms than this. People in Wichita are resilient.”
The city is in the midst of several costly improvement projects totaling hundreds of millions of dollars, including a $500 million-plus water treatment plant and a $75 million-plus baseball stadium.
Plans are also in the works for city-subsidized private development of hotels, offices and apartments — some of which was approved this week — that are expected to generate new property and sales tax revenue to help pay for the stadium.
A shrinking Spirit workforce could mean a reduction in the amount of money those new projects generate.
In addition, the council will be called on next month to approve or shelve a $1 billion to $1.5 billion improvement project to replace the Century II building with a new convention center and a separate performing arts center.
City Manager Robert Layton said the city does not expect the downturn at Spirit to head off any of the projects currently under construction.
The probability of a general recession was baked into the city’s financial analyses. “We were really conservative in our (revenue) estimates,” Layton said.
Uncertain future
Spirit said that it still has not received notice from Boeing on how long the production suspension will last. Gentile said Spirit plans to “facilitate job fairs with other aerospace companies to help laid-off employees transition to new jobs.”
“Our goal is to support Boeing and a safe return to service of the Max,” Gentile said in the Friday news release. “We continue to work with Boeing to develop a new production schedule for 2020 with an eye toward minimizing disruption, maintaining the stability of our production capabilities, and best positioning Spirit for the future.
“When production levels increase sufficiently in the future, we look forward to recalling employees impacted by today’s announcement,” he added.
Kansas Gov. Laura Kelly’s office said the state will work closely with local and federal agencies as part of its response to the layoffs.
“I have directed an all-hands-on-deck approach across state government to help workers, Spirit and other Kansas businesses that will be negatively impacted connect with every available resource, and with an emphasis on long-term support,” Kelly said in a written statement.
U.S. Rep. Ron Estes, R-Wichita, said that he’s had discussions with Kelly, the White House, Federal Aviation Administration and Boeing about the effects the groundings would have on employees at Spirit and other industry suppliers throughout south-central Kansas.
“I will continue to work with the FAA to ensure grounded aircraft causing these furloughs can safely return to the skies without any unnecessary delays,” Estes said. “In the meantime, my office in Wichita is available to help connect furloughed employees with the Department of Labor and other resources. I am fully confident that thanks to our skilled workforce and industry partners, our region will remain the Air Capital of the World.”
A newly formed Aviation Task Force, made up of industry stakeholders, business leaders, government officials, the United Way and the Wichita Community Foundation, is working to mitigate the impacts of the Spirit layoffs, according to Estes.
Senate President Susan Wagle said she is hoping for a swift resolution so workers can get back to work.
“I am once again calling on the FAA to swiftly and thoroughly investigate the issues with the Boeing 737 MAX in order to ensure Kansans can get back to work as quickly as possible,” she said in a written statement. “I remain committed to working with Spirit AeroSystems and other Kansas employers impacted by these layoffs with job retraining and support. The lives and livelihoods of Kansans hang in the balance while we wait for a solution to this problem.”
Spirit’s success tied to the 737
Spirit’s economic success has been tied to that of Boeing — and the 737 — since the company formed as a spin-off of Boeing Commercial Airplanes.
More than half of Spirit’s revenue comes from the production of 737 aircraft components. The 737 Max was grounded worldwide in March after a pair of deadly crashes in Indonesia and Ethiopia killed 346 people.
Before the 737 Max was grounded, Spirit was in the midst of an economic boom. In the past two years, the company has announced plans to add thousands of jobs and invest $1 billion in its Wichita factory.
In return, Wichita and Sedgwick County agreed to pay $14.5 million for a building at Spirit’s factory on South Oliver. The state of Kansas pitched in $23.5 million and agreed to allow the company to keep 95 percent of its new workers’ state income taxes for up to 10 years. To fill those jobs, area organizations and universities have placed an increased focus on jobs training and scholarships.
The company planned to increase monthly production of the jets from 52 to 57 as early as June of this year. But that plan was taken off course by the 737 Max crashes.
After the crashes, Boeing reduced its production to 42 of the jets a month. But Spirit continued building 52 fuselages a month in anticipation of a quick fix.
That fix hasn’t happened.
Boeing has continued to push back its target date for returning the 737 Max to the sky. The commercial and defense aviation giant faces re-certification obstacles and a change in leadership after former CEO Dennis Muilenburg was ousted last month.
Earlier in December, Boeing announced it would suspend production of the 737 Max. Before it can return, it must gain approval from the U.S. Federal Aviation Administration.
The Spirit layoffs have dealt “a harsh blow” not only to that company but also to local suppliers and subcontractors who were completing work related to the 737 Max, Sen. Jerry Moran said.
Moran was in Wichita Thursday to tour one of those suppliers, Cox Machine. It’s immediately unclear if some of Wichita’s smaller companies will lay off employees in response.
“This week, I had conversations with both the incoming CEO at Boeing and the FAA Administrator to encourage them to work together and do everything necessary to get the 737 MAX safely back in the air. I will work with business leaders and Administration officials to do everything possible to see that this is a short-term impact to the aviation and aerospace industry in Wichita,” Moran said in a prepared statement Friday.
Spirit has taken several measures to cut costs while the company waits, including shortened work weeks, hiring freezes, reducing overtime and decreasing its use of contractors.
Rep. Elizabeth Bishop, a Wichita Democrat whose district sits near Spirit, hadn’t yet heard of the layoffs when reached by phone Friday morning.
“I knew it was coming. We just did. But I didn’t think it was going to be quite that heavy,” Bishop said.
Bishop said her family is a “Spirit family” and noted her husband was an engineer until retirement. “This is a real blow,” she said, adding that the Wichita community will have to scramble to help those affected.
South-central Kansas lawmakers met at Wichita State University on Thursday and the ongoing situation at Spirit was discussed, she said.
“These are skilled folks and we need to keep skilled workforce in our community,” Bishop said.
The news follows an announcement in early December from Textron — the parent company of Textron Aviation which makes Cessna and Beechcraft planes in Wichita — that it would eliminate up to 875 positions. Textron has not said how many of those employees worked in Wichita.
Contributing: Dion Lefler of The Wichita Eagle, Jonathan Shorman of The Eagle and Kansas City Star; Bryan Lowry of the McClatchy Washington Bureau
This story was originally published January 10, 2020 at 9:48 AM.