Spirit AeroSystems implements changes to production schedule following 737 MAX groundings

 

 

As a result of the 737 MAX grounding and subsequent Memorandum of Agreement with Boeing (Chicago, Ill., U.S.) in April 2019, Spirit AeroSystems (Wichita, Kan., U.S.) implemented cost-reduction plans to mitigate the impact of the lower 737 production schedule, according to the company’s second quarter 2019 financial results. These actions have included reduced levels of overtime and contractors, a voluntary retirement plan, shortened work weeks for certain employees, a hiring freeze, deferred capital spend and working capital improvements.

“While we implemented these cost-reduction actions in the second quarter and are tracking to plan, the financial benefits will be realized beginning in the second half of the year. These financial benefits will carry into the future as our resources become better aligned with our production rate and future schedule,” says Spirit’s president and CEO Tom Gentile.

According ot Gentile, the company had prepared for a production schedule of 57 737 aircraft per month, and the adjustment to a production rate of 52 “creates significant disruption in a complex production system like the 737.”

Gentile adds, “Having costs for rate 57 but producing at a lower rate had a short-term negative impact on margins. As we restructure our costs to align with the current outlook and benefit from a longer period of rate stability, we expect to see improved quality and production efficiency, as well as margin improvement, back toward our target of 16.5%. We will continue to take full advantage of this pause in rate increases to focus on improving quality, factory efficiency and supply chain health.”

The company plans to announce its third quarter financial results on Oct. 31, including a conference call presentation.

See more of CW’s past coverage on Spirit AeroSystems’ role in the manufacture of composite components for the 737 MAX:

• Spirit AeroSystems finalizes Boeing supply agreement
• Spirit AeroSystems delivers first 737 MAX thrust reverser with a composite inner wall