As Boeing Co prepares to shutter much of a huge factory near Seattle that builds the grounded 737 MAX jet, the economic hit is reverberating across the US in places such as Wichita, Kansas; Stamford, Connecticut; and Cincinnati, Ohio.
Those cities are home to some of 900 companies worldwide that supply parts for the troubled plane, which analysts say is the largest manufactured product exported from the US.
Boeing does not plan to lay off any of the 12,000 workers at its factory in Renton, Washington.
Photo: Reuters
However, smaller parts companies, such as Wichita-based Spirit AeroSystems Holdings Inc, might not have that luxury. They could be forced to cut employees and some might even get pushed out of business.
With 13,500 workers, Spirit is the largest employer in Kansas’ biggest city. It gets half of its revenue from making fuselages for the 737.
Even though MAX production had slowed earlier in the year, Spirit and other suppliers continued to crank out parts, putting many of them in storage. As of Friday last week, Spirit had 90 fuselages on a ramp adjacent to nearby McConnell Air Force Base.
CFM International SA, a joint venture between General Electric Co and France’s Safran SA, which makes the MAX engines, also faces uncertainty.
The Cincinnati-based firm on Tuesday said that it is working with customers and other suppliers “to mitigate the impact of the temporary shutdown of the 737 MAX production.”
The company, which has more than 80 manufacturing sites worldwide with about 50,000 workers, said it can move people and manufacturing across multiple engine programs. That might hold off any layoffs.
CFM produces other engines for commercial and military aircraft.
Stamford-based Hexcel Corp, which makes composite materials used on the 737 MAX frame and engines was already reporting lower sales after Boeing slowed the rate of MAX production.
On Tuesday, the company tried to sound hopeful, saying it was confident in the airplane’s long-term success and looked forward “to its return to flight and gradual ramp-up in production during 2020.”
The 737 MAX is such a big product that by itself, the production hiatus would shrink US GDP by about 0.5 percent in the first quarter of next year, JP Morgan Chase & Co economist Michael Feroli said.
That could cut the US economy’s growth rate by about a quarter to 1.5 percent.
Joseph Brusuelas, chief economist for RSM, a tax advisory and consulting firm, predicted layoffs by suppliers and wrote in a note that some might have trouble staying in business.
“It cannot be overstated just how important the domestic and global supply chains associated with Boeing are to the small and medium-sized firms,” Brusuelas wrote.
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