Dive Brief:
- Spirit AeroSystems, Boeing’s largest supplier, will lay off 2,800 employees at its Wichita, Kansas facility, it announced in a press release Friday.
- The layoffs are the result of Boeing’s decision, announced last month, to temporarily stop production of the 737 Max beginning Jan. 1. The planes have been grounded since March 2019 after they were involved in two crashes, one in 2018 and one in 2019, which killed a total of 346 people. The airplane’s production accounts for more than 50% of Spirit’s annual revenue, the company explained.
- Sprit said it had not received any indication of when production of the aircraft would begin again. When it does, the company expects it to be at a lower level due to the number of 737 Max aircraft already in storage that must be delivered.
Dive Insight:
While Spirit is Boeing’s largest supplier, it is far from its only supplier. In 2017, Boeing spent about $60 billion with almost 13,000 suppliers across the U.S. and 57 countries, the company said in a press release. The scale of Spirit’s layoffs, though, highlight how much suppliers depend on Boeing, one of the largest manufacturers in the country.
Spirit built 1,339 shipsets — the combination of the fuselage, pylon, wing leading edges and other parts — ;in the first nine months of 2019; 651 of those were for Boeing, of which, 453 were for Boeing 737, according to Spirit’s most recent earnings.
Once manufacturing resumes, Spirit expects the production needs of the 737 Max to be lower than they were previously due to the inventory that has not yet been delivered. Spirit has 100 737 Max shipsets it needs to deliver to Boeing while Boeing has hundreds more it still needs to deliver to customers, Spirit said.
“We don’t know when production will resume or what rate it will be when it does,” a spokesperson for Spirit told Supply Chain Dive in an email. “However, when production levels increase sufficiently in the future, we look forward to recalling workers affected by today’s announcement.”
Spirit is communicating with its own suppliers who will be affected by the announcement, the spokesperson said.
Spirit is also working with Boeing to create a production plan for 2020 “with an eye toward minimizing disruption,” Spirit CEO Tom Gentile said in a statement.
It’s not clear when the 737 Max will be able to fly again. Regulators are still investigating and continue to find issues, according to The New York Times.
David L. Calhoun took over as the CEO at Boeing on Monday. “Working together, we will strengthen our safety culture, improve transparency and rebuild trust with our customers, regulators, suppliers and the flying public,” Calhoun said in a press statement emailed to Supply Chain Dive.
The impact on Spirit highlights how disruption at one point in the supply chain can ripple through tiers of suppliers. The recent General Motors strike, which resulted in wage reductions or layoffs for about 75,000 employees at auto parts suppliers, was another example of how a pause in production can affect other companies.
