Key Points
- Spirit AeroSystems is furloughing 700 employees for 21 days due to Boeing’s prolonged strike, which began on September 13.
- The strike has halted production of Boeing’s 767 and 777 jets, creating cash flow issues and storage constraints for Spirit.
- The company has scaled back production of 737 MAX fuselages, reducing output from 31 to 21 per month, with further cuts possible.
- Spirit Aero has fully drawn a $350-million bridge loan facility and may seek further financial support from Boeing.
Spirit AeroSystems, a key supplier for Boeing, announced on Friday that it will furlough 700 employees for 21 days due to the ongoing strike at Boeing’s U.S. factories. The strike began on September 13 and involved over 33,000 workers from Boeing’s West Coast facilities, disrupting production of the 767 and 777 widebody jets. The furloughs primarily affect Spirit employees working on these jet programs.
The halt in production has created cash flow issues and strained Spirit’s inventory storage capacity, forcing the company to take cost-cutting measures. These include a hiring freeze, travel and overtime restrictions, and the furlough of hundreds of workers. Spirit CEO Pat Shanahan expressed empathy for the affected employees, acknowledging the burden on their families while reaffirming the company’s commitment to supporting them through the furlough period.
Spirit AeroSystems, based in Wichita, Kansas, is among several Boeing suppliers feeling the financial pressure from the prolonged strike. The company has invested heavily in materials and tooling for Boeing’s planned production ramp-up of jets. However, due to the strike, Spirit has been forced to scale back its production of the 737 MAX fuselages, reducing output from 31 to 21 per month in recent months, and may have to cut further if the strike persists.
The strike’s impact extends beyond Spirit AeroSystems. Boeing has also had to furlough thousands of its salaried employees in response to the strike but canceled those furloughs after announcing plans to cut 10% of its workforce, equating to roughly 17,000 jobs. The ongoing disruptions may prevent Boeing from achieving its goal of producing 38 MAX jets per month by the end of 2024, a significant increase from its July production rate of 25 jets per month.
Spirit has drawn on a $350-million bridge loan facility, arranged when Boeing agreed to acquire the supplier, and may seek additional financial support from Boeing. The company has been increasing inspections of 737 MAX fuselages at its Kansas factory, ensuring more units are ready for delivery once the strike concludes. However, delays in these inspections have already slowed deliveries to Boeing’s Renton, Washington, factory, further complicating production timelines.
Spirit Aero’s financial struggles have become more evident, doubling second-quarter losses. Despite these challenges, Spirit Aero shares dipped slightly in morning trading but remained on track for a weekly gain.
