Allison Lampert
(Reuters) – Key Boeing supplier Spirit AeroSystems (NYSE:) is limiting overtime and hiring as production slows due to lower 737 MAX production, Spirit told Reuters on Friday.
Production of Boeing’s (NYSE:) MAX jetliners has fallen sharply in recent weeks as U.S. regulators step up factory inspections and workers slow the assembly line outside Seattle to complete outstanding work. Boeing’s deliveries in March fell by half from a year earlier as the company faces a massive crisis caused by the Jan. 5 explosion of a panel on an Alaska Airlines plane.
The slowdown extends to Spirit, the struggling industry supplier that Boeing spun off from in 2005, which accounts for about 70% of 737 production. Boeing is now in talks to acquire the company.
“When I walk the floor, things move slower,” said Cornell Byrd, president of the Wichita Kansas union district that represents Spirit Aero workers.
Beard said employees are expected to raise concerns about possible layoffs at an internal union meeting on Saturday, adding that the company cut overtime last week. Although Spirit has not announced any layoffs, some employees are nervous and are catching up on slower build times.
“We’re just hanging in there,” he said.
According to the document, Spirit has a contract with Boeing for the 737 MAX program, and the American aircraft manufacturer can reduce the volume of purchases at any time.
Spirit AeroSystems is “customizing its production to support our customers’ rate profile,” spokesman Joe Buccino told Reuters in an email. This includes, in the short term, “limiting overtime as well as hiring for specific positions, including contractors.”
Analyst and Reuters interviews with suppliers show Boeing is largely continuing to take deliveries equivalent to production of 38 planes per month, a limit imposed by the Federal Aviation Administration (FAA) after the explosion, although its monthly output is well below that level.
While the decline in Boeing MAX production has caused uncertainty and concern among suppliers, it is unclear how the move will impact the aircraft maker’s broader supply chain.
Boeing said it could not comment on the situation due to the quiet period before its quarterly earnings on April 24.
AeroDynamic supply chain consultant Glenn McDonald said Boeing’s goal of cutting so-called trips, or work in progress, should make production more stable in the future.
“The big unknown is how long the supplier ratio will remain at 38 unless Boeing can resolve its production line problems and increase its actual delivery rate,” he said.
Spirit hasn’t reported an annual profit since 2020 after two fatal 737 MAX crashes and a pandemic-fueled travel downturn that has hit other Boeing suppliers.