BA Boeing Co

By Doug Cameron 

The biggest Boeing Co. 737 MAX supplier said it is planning an initial 2,800 layoffs, the first announced job cuts since the grounding of a plane that is rippling through the broader aerospace industry.

Spirit AeroSystems Holdings Inc. makes the fuselage and engine parts for the MAX and had been producing enough for 52 jets a month before Boeing said it would freeze assembling the planes in January for a "temporary" time.

the largest U.S. manufacturing exporter and one of the nation's top private employers, Chicago-based Boeing plays a big role across the industry and in the U.S. economy.

Production of the MAX, which was Boeing's best-selling plane, supported thousands of jobs across a network of over 600 suppliers and hundreds of other smaller firms in the global MAX supply chain.

Spirit derives more than half its sales from the MAX and works on other Boeing programs. But the cuts, which cover more than 20% of the staff at the company's Wichita, Kan., plants came much earlier than analysts expected. Those facilities had been storing parts for 100 surplus MAX jets while Boeing continued to assemble the plane, building up an inventory of around 400 aircraft.

Spirit Chief Executive Tom Gentile said the decision was a "necessary step" given the uncertainty with MAX production. The company said it could have to cut more workers.

The layoffs will make it harder for Boeing to follow through with any future increases in MAX production if Spirit and other suppliers shed workers, who could be tough to rehire. That will likely add to the pressures already hurting airlines that have removed the plane from schedules through June. Flight cancellations and changes have affected thousands of travelers.

The final decision to allow the MAX to fly again rests with regulators who are assessing new flight-control software and training regimes.

Rep. Rick Larsen (D., Wa.) on Friday called Spirit's layoffs and impact on jobs "disheartening," Still, he told reporters, "this plane cannot fly until it's certified safe to fly." Mr. Larsen serves on the House Transportation and Infrastructure Committee, which has been investigating Boeing.

Spirit's announcement came a day after Boeing released internal communications -- dating as far back as 2013 -- that show employees displaying a cavalier attitude toward safety and ridiculing regulators as well as some airline officials. The FAA said nothing in the messages pointed to any new safety risks.

The release of the messages follows months of escalating congressional criticism of Boeing's initial design of the MAX, which has been grounded world-wide since March following a pair of deadly crashes in Indonesia and Ethiopia that claimed 346 lives.

Boeing also faces a mounting financial squeeze resulting from the buildup of more than 800 delivered and completed jets idled world-wide.

The company has said it doesn't plan to lay off any of its own workers at this stage and earlier this month announced that it would transfer 3,000 staff to other tasks and aircraft programs. The plane maker employs around 12,000 workers on the 737, most at its assembly plant in Renton, Wash.

Spirit's move, however, will hit its own base of smaller suppliers, while makers of everything from engines to aircraft seats and catering equipment also grapple with the halt in MAX production.

The layoffs are expected to start on Jan. 22, and Spirit said it planned smaller job cuts at two plants in Oklahoma. The company has been working with Kansas Gov. Laura Kelly on potential retraining of affected staff.

Wichita has a big aerospace cluster of suppliers and plane makers, including the Cessna arm of Textron Inc. The labor market for aerospace engineers has been tight, and layoffs from big suppliers could make it tougher for Boeing to restart MAX production and increase output in future, said analysts.

Spirit shares were recently down 2.5%, with other MAX suppliers sharply lower. Triumph Group Inc., which makes floor panels and ducting, shed more than 6% and engine-parts specialist Allegheny Technologies Inc. fell 4%.

Boeing has been helping out the supply chain -- for example, through loans and easier payment terms -- and leaning on big partners such as General Electric Co., which is the exclusive supplier of MAX engines through a joint venture, to do likewise.

"We will continue working with Spirit, and all of our suppliers, to address hardships and manage risk during this time," Boeing said in a statement.

Most suppliers had favored another cut in MAX production over a complete freeze, fearing skilled workers would depart and be hard to lure back if and when Boeing resumes output. The company still has a backlog of 4,500 MAX jets, and had been set to boost output when the plane was grounded.

Some suppliers have avoided layoffs so far by transferring workers to other aircraft programs, including for Airbus and military jets.

Alison Sider contributed to this article.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

January 10, 2020 15:15 ET (20:15 GMT)

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