Max Suppliers Largely Mum on Effects of Production Pause

While next month’s planned suspension of the 737 Max production line will certainly preserve cash for Boeing, it will also send ripples through a supplier network populated with companies ranging from subassembly makers to fastener manufacturers. Although few have said with any certainty how they expect the shutdown to influence their operations and bottom lines, undoubtedly all will feel some effect. To what extent will depend on what proportion of a given company’s revenue comes from its Max business and how much cashflow loss it can afford to absorb. Therefore, it stands to reason that smaller companies in the supply chain will feel the most profound effects, leaving their workforces the most vulnerable to layoffs.

Related Article

Boeing To Halt 737 Max Production

The U.S. airframer cites a need to “prioritize” delivery of stored aircraft in its decision to stop building the model in January.

Some of the higher-profile companies—such as fuselage supplier Spirit Aerosystems, Honeywell, and the two members of the CFM engine partnership—have in past financial statements reported on the effects they have already felt since the Max’s grounding in March. None, however, would talk about what contingency plans they and Boeing have formulated in the event of a complete line shutdown in Renton, Washington.

“Following Boeing's decision to temporarily suspend production on the 737 Max program from January 2020, CFM is working closely with its suppliers and partners to assess this new situation and its consequences,” said CFM in a statement.

Spirit issued a similarly opaque statement. "Following the announcement from Boeing that they will temporarily halt production of the 737 Max, we are working closely with our customer to determine what that means for Spirit,” it said. “As decisions are made on how to best mitigate this additional impact, we will communicate any new information to employees and other stakeholders."

Honeywell, meanwhile, told BJT that remarks by CFO Greg Lewis during its third-quarter earnings call still apply and that it could offer no further comment. “At this point, we have not seen and do not anticipate a significant impact to Honeywell,” said Lewis.

Boeing called the decision to suspend production the “least disruptive” option to maintaining long-term production systems and supply-chain health. The company said the pause would not result in any layoffs at its narrowbody plant in Renton, Washington, and that it would reassign employees to other sites in the Puget Sound region. “As we have throughout the 737 Max grounding, we will keep our customers, employees, and supply chain top of mind as we continue to assess appropriate actions,” said Boeing in a statement. “This will include efforts to sustain the gains in production system and supply-chain quality and health made over the last many months.”