ARLINGTON, VIRGINIA — Union dispute at Spirit AeroSystems may stall Boeing's 737 MAX production goals.
Boeing's ambitious plan to increase production of its top-selling aircraft, the 737 MAX, hangs in the balance as critical supplier, Spirit AeroSystems, returns to negotiation amidst a labor dispute that has caused a production standstill of the 737 fuselage assemblies.
Spirit AeroSystems, based in Kansas, halted its operations last Thursday, casting a dark shadow on Boeing's objective of pushing up its production volume by almost 25% to 38 aircraft per month by mid-year. The Kansas factory is where the majority of the 737's body framework is assembled.
Approximately 6,000 members of the International Association of Machinists and Aerospace Workers spurned a four-year contract proposal and voted in a sweeping majority to strike. The negotiations, set to resume on Saturday, involve union leaders who initially supported the contract but later assured workers that their collective voice had been acknowledged.
Formerly a Boeing subsidiary, Spirit delivers 737 airframes by train to factories in the Seattle area. However, a production hiccup in April, which momentarily ceased deliveries from the previously associated unit, suggests that Boeing's safety buffer might be lesser than usual.
Cai von Rumohr, a Cowen analyst, conjectured that even a short strike lasting two to three weeks could begin to affect Boeing's 737 production.
The primary contention points revolve around maintaining health insurance benefits, Spirit's compulsory overtime rules, and the proposed contract duration, reported Cornell Beard, who is at the helm of District 70. Union members are lobbying for a three-year agreement instead of the proposed four-year term.
Spirit, in an official statement, maintained its ongoing engagement with union representatives and expressed its intent to finalize a fair and mutually beneficial contract as swiftly as possible.
In anticipation of a 737 production rate of 42 jets per month by year-end, Boeing remains undeterred. Spirit AeroSystems had also been ramping up its capabilities by training new employees and collaborating with its suppliers to accommodate the two proposed 737 production hikes this year.
In an internal memo, Deal encouraged workers to keep their focus on their tasks, ensuring that updates would be given upon gaining more insight from Spirit.
The Wichita facility also manufactures engine pylons for Airbus' A220 narrowbody and the carbon composite nose section of Boeing’s 787 Dreamliner. In response to the situation, an Airbus spokesperson stated that the company routinely assesses suppliers and monitors their financial stability as part of their contingency planning process.
One conventional strategy to combat possible labor unrest is to amass inventory. However, analyst Kristine Liwag from Morgan Stanley suggests that Boeing, based in Arlington, Virginia, might have fewer 737 fuselages on hand due to a defect that first appeared in Spirit's April batch. She estimates that roughly 40 of the 65 fuselages stored as reserves by Boeing will require repairs.
