Airplane fuselages bound for Boeing’s 737 Max production facility sit in storage at their supplier

Workers at Boeing’s biggest supplier for the building of its 737-MAX plane are fearing for their jobs in the week before Christmas after the aircraft manufacturer announced its decision to suspend construction of the aircraft.

Layoffs at Spirit AeroSystems Holdings Inc. in Wichita, Kansas seem almost certain, particularly if Boeing stops paying Spirit to build and store fuselages at current rates.

Evidence of the slowdown in construction is plain for all to see with at least 90 fuselages simply sitting on the concrete, under wraps, with nowhere to go until a decision can be made to ramp up production once again, perhaps some time in 2020.

With overwhelming demand for the 737-MAX plane, Spirit AeroSystems Holdings planned to staff its factory with enough workers to maintain a build rate of 52 aircraft per month with plans to eventually increase to 57 aircraft – but that was before the current nine-month crisis hit. 

But Boeing’s decision to suspend their 737MAX production will lead to a knock-on effect to hundreds of suppliers that come together to help build the plane. 

The Max was grounded worldwide in March after the second of two deadly crashes in Indonesia and Ethiopia that killed a total of 346 people. For months, Boeing used the parts to build about 400 Max planes that it could not deliver to airlines. 

Boeing does not currently plan to lay off any of the 12,000 workers at its factory in Renton, Washington. But smaller parts companies like Wichita-based Spirit AeroSystems might not have that luxury. They could be forced to cut employees, and some might even get pushed out of business. 

With 13,500 workers, Spirit is the largest employer in Kansas´ biggest city.  

Airplane fuselages bound for Boeing's 737 Max production facility sit in storage at their top supplier, Spirit AeroSystems Holdings Inc, in Wichita, Kansas

Airplane fuselages bound for Boeing's 737 Max production facility sit in storage at their top supplier, Spirit AeroSystems Holdings Inc, in Wichita, Kansas

Airplane fuselages bound for Boeing’s 737 Max production facility sit in storage at their top supplier, Spirit AeroSystems Holdings Inc, in Wichita, Kansas

Boeing suppliers are bracing for a possible halt in production of the 737-MAX to take place in January. Spirit Aerosystems had 90 fuselages on a ramp adjacent to nearby McConnell Air Force Base in Kansas when these pictures were taken this week

Boeing suppliers are bracing for a possible halt in production of the 737-MAX to take place in January. Spirit Aerosystems had 90 fuselages on a ramp adjacent to nearby McConnell Air Force Base in Kansas when these pictures were taken this week

Boeing suppliers are bracing for a possible halt in production of the 737-MAX to take place in January. Spirit Aerosystems had 90 fuselages on a ramp adjacent to nearby McConnell Air Force Base in Kansas when these pictures were taken this week

The grounding of the planemaker's fast-selling aircraft will likely result in lost revenues for hundreds of suppliers

The grounding of the planemaker's fast-selling aircraft will likely result in lost revenues for hundreds of suppliers

The grounding of the planemaker’s fast-selling aircraft will likely result in lost revenues for hundreds of suppliers

Boeing has continued to purchase parts from some suppliers at a production rate higher than its own, in order to keep the supply chain fluid and avoid major disruptions when the MAX returns to service

Boeing has continued to purchase parts from some suppliers at a production rate higher than its own, in order to keep the supply chain fluid and avoid major disruptions when the MAX returns to service

Boeing has continued to purchase parts from some suppliers at a production rate higher than its own, in order to keep the supply chain fluid and avoid major disruptions when the MAX returns to service

Photos show there are dozens of 737-MAX fuselages sitting outside a factory in Wichita, Kansas

Photos show there are dozens of 737-MAX fuselages sitting outside a factory in Wichita, Kansas

Photos show there are dozens of 737-MAX fuselages sitting outside a factory in Wichita, Kansas

A Boeing spokesman declined to comment on discussions with suppliers and said that Boeing will work to ‘sustain the gains in production system and supply chain quality and health made over the last many months.’

The fallout depends on how long Boeing’s freeze lasts, and how much, if any, compensation Boeing pays to prop up some of the roughly 680 suppliers that feed its best-selling program.

Payments may not come quickly.

Planemakers rarely signal any intention to help the supply chain in advance, otherwise hundreds of healthy firms would demand compensation immediately, a supply chain source said. 

Instead, Boeing will assess impacts and may quietly help some companies bridge the gap until production resumes.

Boeing will be caught in two conflicting pressures: the need to conserve cash, and maintaining its ability to ratchet production upwards once the MAX starts flying again – a goal behind Boeing’s decision not to lay off any employees.

If parts supply companies stop production, it will be difficult for them to quickly restart their factories, and that could further delay any startup of Boeing´s assembly lines.  

The suspension of MAX production will pressure suppliers that are relying on the demand from Boeing

The suspension of MAX production will pressure suppliers that are relying on the demand from Boeing

The suspension of MAX production will pressure suppliers that are relying on the demand from Boeing

Spirit has continued to churn out parts for the jet at a rate of up to 52 units per month, even as Boeing cut its own production to 42 per month

Spirit has continued to churn out parts for the jet at a rate of up to 52 units per month, even as Boeing cut its own production to 42 per month

Spirit has continued to churn out parts for the jet at a rate of up to 52 units per month, even as Boeing cut its own production to 42 per month

Spirit AeroSystems receives nearly 80% of revenue from Boeing as it makes the fuselage, pylons, thrust reverser, wing leading edges and engine nacelles

Spirit AeroSystems receives nearly 80% of revenue from Boeing as it makes the fuselage, pylons, thrust reverser, wing leading edges and engine nacelles

Spirit AeroSystems receives nearly 80% of revenue from Boeing as it makes the fuselage, pylons, thrust reverser, wing leading edges and engine nacelles

If parts supply companies stop production, it will be difficult for them to quickly restart their factories, and that could further delay any startup of Boeing´s assembly lines

If parts supply companies stop production, it will be difficult for them to quickly restart their factories, and that could further delay any startup of Boeing´s assembly lines

If parts supply companies stop production, it will be difficult for them to quickly restart their factories, and that could further delay any startup of Boeing´s assembly lines

Spirit AeroSystems CEO Tom Gentile said in October during the Kansas Economic Outlook Conference that it would take a long time to come back if production were reduced. 

‘The potential loss of talent, access to capital and incremental risk on the supply chain all create substantial uncertainty about Boeing’s ability to increase production levels once the pause ends,’ Canaccord Genuity analyst Ken Herbert said. 

About 80% of Boeing’s closely guarded recurring costs in building the mature 737 – a figure that some sources place as low as $10 million per plane, a fraction of $40 million to $50 million estimated market value – involve payments to outside suppliers for parts. 

Big, diversified suppliers of systems like avionics and landing gear – like United Technologies Corp or Honeywell International Inc – will be relatively insulated because their revenue is spread across other Boeing and Airbus programs. They can also tap lucrative after-sales parts and repair services.

But providers of materials or structures, ranging from Spirit to a cluster of mom-and-pop machine shops in Washington state, where the 737 MAX is made, will be disproportionately exposed because those parts are sold once and rarely replaced.

Spirit AeroSystems spokeswoman Keturah Austin said: ‘Should Boeing make a decision to change its production rate on the MAX and expectations for suppliers, we will work with them to understand the impact to Spirit AeroSystems.’  

Fuselages which were bound for Boeing's 737 Max production facility await shipment on rail sidings at their top supplier

Fuselages which were bound for Boeing's 737 Max production facility await shipment on rail sidings at their top supplier

Fuselages which were bound for Boeing’s 737 Max production facility await shipment on rail sidings at their top supplier

The factory had been building the planes at a rate of 52 aircraft per month with plans to eventually increase to 57 aircraft

The factory had been building the planes at a rate of 52 aircraft per month with plans to eventually increase to 57 aircraft

The factory had been building the planes at a rate of 52 aircraft per month with plans to eventually increase to 57 aircraft

Currently, it appears the fuselages are lined up on concrete and also on railway sidings - going nowhere fast

Currently, it appears the fuselages are lined up on concrete and also on railway sidings - going nowhere fast

Currently, it appears the fuselages are lined up on concrete and also on railway sidings – going nowhere fast

With 13,500 workers, Spirit is the largest employer in Kansas´ biggest city. It gets half of its revenue from making fuselages for the 737

With 13,500 workers, Spirit is the largest employer in Kansas´ biggest city. It gets half of its revenue from making fuselages for the 737

With 13,500 workers, Spirit is the largest employer in Kansas´ biggest city. It gets half of its revenue from making fuselages for the 737

Even though Max production had slowed earlier in the year, Spirit and other suppliers continued to crank out parts, putting many of them in storage

Even though Max production had slowed earlier in the year, Spirit and other suppliers continued to crank out parts, putting many of them in storage

Even though Max production had slowed earlier in the year, Spirit and other suppliers continued to crank out parts, putting many of them in storage

One worried U.S. Pacific Northwest supplier quickly called a Boeing contact after headlines predicted output cuts.

‘We are already under contract for parts,’ he said. ‘We have already bought material, we already have labor into it.’

His factory has 16 weeks to deliver a part to the 737 factory in Renton, south of Seattle, and Boeing in turn has 90 days to pay. ‘All of our costs are up front. We have a lot invested,’ he said.

The shutdown comes as the world’s largest planemaker is urging suppliers to cut prices or give up a greater share of the after-sales market for parts and repairs – the focus of Boeing’s own new services business.

One U.S.-based hardware supplier has watched its Boeing order backlog slide over the past six months, making 2020 sales forecasts difficult. 

The ripple effects of the Max grounding already have hit airlines, which have been forced to delay putting the Max into their flight schedules. That has cut the number of available seats, pushing prices up. But analysts say it also has stopped airlines from adding routes and expanding. 

For now, the planes fuselages will sit idle while the crisis rumbles on, not looking to take to the skies anytime soon.

If parts supply companies stop production, it will be difficult for them to quickly restart their factories, and that could further delay any startup of Boeing´s assembly lines

If parts supply companies stop production, it will be difficult for them to quickly restart their factories, and that could further delay any startup of Boeing´s assembly lines

If parts supply companies stop production, it will be difficult for them to quickly restart their factories, and that could further delay any startup of Boeing´s assembly lines

Spirit AeroSystems CEO Tom Gentile said in October during the Kansas Economic Outlook Conference that it would take a long time to come back if production were reduced

Spirit AeroSystems CEO Tom Gentile said in October during the Kansas Economic Outlook Conference that it would take a long time to come back if production were reduced

Spirit AeroSystems CEO Tom Gentile said in October during the Kansas Economic Outlook Conference that it would take a long time to come back if production were reduced

Wichita, Kansas-based Spirit AeroSystems, which is the largest employer in the state's largest city, said in a statement that it was working with customers to determine what Boeing's announcement means

Wichita, Kansas-based Spirit AeroSystems, which is the largest employer in the state's largest city, said in a statement that it was working with customers to determine what Boeing's announcement means

Wichita, Kansas-based Spirit AeroSystems, which is the largest employer in the state’s largest city, said in a statement that it was working with customers to determine what Boeing’s announcement means

Boeing will likely face some tough negotiations with suppliers about what level of payments it will provide during the production hiatus. The company will want to avoid any layoffs or shutdowns by suppliers that would keep it from quickly restarting production once its safety is approved

Boeing will likely face some tough negotiations with suppliers about what level of payments it will provide during the production hiatus. The company will want to avoid any layoffs or shutdowns by suppliers that would keep it from quickly restarting production once its safety is approved

Boeing will likely face some tough negotiations with suppliers about what level of payments it will provide during the production hiatus. The company will want to avoid any layoffs or shutdowns by suppliers that would keep it from quickly restarting production once its safety is approved

Boeing will halt Max production in January with no date for it to resume, a realization that regulators will not clear the plane for takeoff anytime soon

Boeing will halt Max production in January with no date for it to resume, a realization that regulators will not clear the plane for takeoff anytime soon

Boeing will halt Max production in January with no date for it to resume, a realization that regulators will not clear the plane for takeoff anytime soon

The FAA will not give a date for when the Max can return to the skies, and last week the agency said Boeing had an unrealistic expectations for putting the plane back into service

The FAA will not give a date for when the Max can return to the skies, and last week the agency said Boeing had an unrealistic expectations for putting the plane back into service

The FAA will not give a date for when the Max can return to the skies, and last week the agency said Boeing had an unrealistic expectations for putting the plane back into service

Employees walk past a Boeing 737 Max aircraft at Boeing's 737 Max production facility in Renton, Washington state

Employees walk past a Boeing 737 Max aircraft at Boeing's 737 Max production facility in Renton, Washington state

Employees walk past a Boeing 737 Max aircraft at Boeing’s 737 Max production facility in Renton, Washington state

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