Spirit AeroSystems Initiates Workforce Actions Due to Expected Lower Levels of 737 MAX Production
WICHITA, Kan., January 10, 2020 -- Spirit AeroSystems [NYSE: SPR] today issued a notice under the Worker Adjustment and Retraining Notification Act of layoffs affecting approximately 2,800 employees at its Wichita, Kansas facility. Spirit is taking this action because of the 737 MAX production suspension and ongoing uncertainty regarding the timing of when production will resume and the level of production when it does resume. This decision allows Spirit to begin aligning its cost structure to the production suspension and, after such suspension, what Spirit expects will be production levels lower than Spirit’s levels in 2019.
Spirit is a significant supplier on the 737 MAX program, with its workshare accounting for 70 percent of the airplane’s structure. This includes the entire fuselage, thrust reversers, engine pylons and wing components. In addition, the MAX represents more than 50 percent of Spirit’s annual revenue.
Spirit has not received notice from its customer, Boeing, on how long the production suspension will last or what the production rate will be in the future. Spirit believes that, when production resumes, the levels will be lower than previously expected due, in part, to the customer’s need to consume over 100 MAX shipsets currently in storage at Spirit’s facilities. In addition, Boeing has several hundred MAX airplanes built but not yet delivered to its customers.
In conjunction with today’s actions, Spirit plans to implement smaller workforce reductions later this month for its plants in Tulsa and McAlester, Oklahoma, which also produce components for the MAX. Based on final production rates agreed with Boeing, Spirit may have to take additional workforce actions in the future.
“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,” said Tom Gentile, Spirit AeroSystems President and CEO. “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.”
Employees will receive compensation for the applicable 60-day notice period. Spirit’s Wichita employees affected by these layoffs will start exiting the company beginning January 22.
Spirit has taken steps to lessen the impact of expected layoffs, transferring some 737 MAX employees to other programs where possible. Additionally, Spirit plans to facilitate job fairs with other aerospace companies to help laid-off employees transition to new jobs.
“Our goal is to support Boeing and a safe return to service of the MAX,” added Gentile. “We continue to work with Boeing to develop a new production schedule for 2020 with an eye toward minimizing disruption, maintaining the stability of our production capabilities, and best positioning Spirit for the future. When production levels increase sufficiently in the future, we look forward to recalling employees impacted by today’s announcement.”
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