Spirit AeroSystems, Boeing’s struggling supplier, will begin furloughs in three weeks if a strike at its biggest customer continues, in a signal of how the work stoppage in Washington is rippling through the aerospace supply chain.
Spirit makes the fuselage for the 737 Max, which is assembled at a Boeing site where the aerospace giant’s workers walked off the job earlier this month. An industry source said Spirit was behind schedule, so it was using the labour unrest to catch up on filling older orders, but should the strike stretch past mid-October, the supplier would no longer be insulated from it. The Spirit furlough plans have not been previously reported.
The Wichita, Kansas, company is not alone in bracing for the effects of the strike by the 33,000 members of the International Association of Machinists and Aerospace Workers District 751. Boeing spends about $1bn per month with companies that supply the 737, 767 and 777 jetliner programmes. But last week chief financial officer Brian West said it was stopping most purchase orders with those businesses as it tried to conserve cash.
“We are planning to make significant reductions in supplier expenditures,” he said. “Specifically for the non-787 programmes . . . if you’re not behind, and we have safety stock, don’t deliver any more.”
A Boeing spokesperson declined to comment about the prospect of a Spirit furlough.
The machinists, who have seen wages rise just 4 per cent over the past eight years, walked out on September 13 after rejecting a deal negotiated by union leaders that fell short of the original demand to raise wages 40 per cent over four years. Melius Research analyst Robert Spingarn found median pay among 17 aerospace and defence companies rose 12 per cent between 2018 and 2023, while median pay at Boeing fell 6 per cent.
Moreover, many rank-and-file members also remain angry about a 2014 negotiation that eliminated their pensions in a 51-49 vote after Boeing said it would move work to its non-union factory in South Carolina.
An end to the strike seemingly moved further out of reach after Boeing made an offer on Monday directly to workers, rather than their union representatives, and demanded that workers vote on it. The offer would raise wages 30 per cent but drew a sharp rebuke from District 751. The union said a survey of its members found the latest offer “inadequate”, while bypassing the union was “disrespectful”.
The machinists have gone on strike seven times since 1948, and the average strike lasted 58 days.
Covid-19 left the aerospace supply chain more fragile than before the pandemic. Aerospace manufacturers cut back their workforces and delayed equipment purchases, only to be caught flat-footed when demand for aircraft roared back and they needed to scale production quickly.
The industry has seen parts shortages, and Boeing said in July it planned to buy Spirit, which has reported losses since 2020.
Kevin Michaels, managing director at AeroDynamic Advisory, said companies such as Spirit that make fuselages and wings were among the most vulnerable to strike-related disruption, as well as cabin interior manufacturers, a category that includes RTX-subsidiary Collins Aerospace.
“It’s clear that labour has the cards,” he said. “Boeing is going to come to the realisation, if it hasn’t already, it just has to settle as fast as it can . . . The impact to the supply chain depends on how long it lasts, and that is tied to how angry the unions are.”
Some branches of the supply chain appear more insulated from the stoppage. A slowdown at engine component makers Howmet Aerospace, ATI or Carpenter Technology “seems unlikely”, said JPMorgan Chase analyst Seth Seifman. A shortage of metal castings and forgings two years ago created a bottleneck in engine production that engine-makers are loath to repeat.
A spokeswoman for Dallas-based ATI said it was too early to gauge the strike’s impact, but “like everyone in the supply chain, we’re monitoring closely”.
For some companies, the strike may even be a boon. Deliveries of Leap engines from CFM International, the joint venture of Safran and GE Aerospace, to both Boeing and arch-rival Airbus were down 29 per cent in the second quarter due to their own supply chain problems. The work stoppage gave them a chance to catch up, Michaels said.
Nick Cunningham, an analyst at Agency Partners, said that while the strike was unlikely to threaten the health of big suppliers such as CFM, which provides the Max’s Leap engines, the “people down the supply chain who rely on volume, they will have a problem”. A crucial question would be whether the “top-tier suppliers help the smaller ones with working capital and liquidity so that when orders pick up, they can get going again”.
All players in aerospace have an incentive to keep the supply chain healthy to head off production bottlenecks. Analysts noted that Airbus, which has battled its own supply chain problems as it has sought to ramp up output, could suffer indirectly from the strike if smaller suppliers started to fail.
Rosemary Brester owns Hobart Machined Products, a small shop about 30 miles from Seattle that makes parts used in the 767 and 777. She noted that other small suppliers in the area have been hit hard because they hired staff and purchased equipment to boost production along with Boeing, which had aimed to increase output until its plans were upended in January by a door panel blowing out on a commercial flight.
“We did not hire because something just told me it wasn’t the right thing to do at the moment,” she said. “But my fellow colleagues in the industry . . . here, they laid off the first day of the strike.”
Small suppliers lacked the cash to weather a long strike, she said. At her own shop, orders have slowed. The cash reserves were fine so far, “but if this lasts another two or three weeks, I don’t know where we’ll be”.
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