“Harsh Blow” – Boeing Supplier Cuts 2,800 Jobs Amid 737 Max Production Halt

Just as Boeing’s departing CEO deployed his $62.2 million golden parachute last month as the 737 Max crisis persists, the first signs of supply chain problems for the Max was realized Friday when jet parts maker Spirit AeroSystems laid off thousands of employees, reported AP News.

The Wichita-based company announced 2,800 layoffs on Friday after Max production was halted this month, and the ungrounding of the aircraft remains unclear. 

News of the layoffs come a day after Boeing published internal emails showing employees mocking Federal Aviation Administration (FAA) investigators and ridiculing engineers for their incompetence on Max design. 

Spirit AeroSystems is the largest employer in Wichita and defines itself as a “significant supplier” to the Max program. 

At least 40 aerospace firms are based in Wichita that manufactures parts for the production of the 737 Max. The layoffs at Spirit could be an indication that the Max supply chain is coming under pressure.

“The difficult decision announced today is a necessary step given the uncertainty related to both the timing for resuming 737 MAX production and the overall production levels that can be expected following the production suspension,” Spirit AeroSystems CEO Tom Gentile said in a statement.

“We are taking these actions to balance the interests of all of our stakeholders as a result of the grounding of the 737 MAX, while also positioning Spirit to meet future demand,” Gentile added. 

The announcement of Spirit layoffs comes as manufacturing in the US continues to decelerate. Manufactures cut payrolls last month by 12,000, with concerns more job cuts could be seen in the weeks ahead. 

Affected Spirit employees will be paid for two months; the layoffs start on Jan. 22.

Sen. Jerry Moran, a Kansas Republican, said the disruption of Boeing’s supply chain will have “short-term impacts” on the economy. 

“The layoffs announced today [Friday] at Spirit AeroSystems have dealt a harsh blow not only to the company but also to Spirit suppliers and subcontractors,” Moran said. “I plan to continue working with the administration and Department of Defense to showcase the capabilities of Wichita manufacturers in an effort to diversify the industry and bring more job opportunities to the region.”

Economists from JPMorgan, Goldman, and Capital Economics recently said Boeing’s production cut could shave off up to 0.5% from the first quarter 2020 GDP. Boeing’s suppliers, such as Spirit, are already reeling from the uncertainty as layoffs are just starting.