Boeing just announced it would suspend production of its 737 MAX jetliner. This is an escalation of the crisis facing the giant plane maker that will ripple through the global aerospace industry. Boeing plans to halt production in January at its Seattle plant. The MAX was grounded globally in March following two fatal crashes of the aircraft within five months. Boeing employs around 12,000 workers at that 737 assembly plant. But production of the 737 MAX also supports thousands of jobs across a network of over 600 suppliers and hundreds of other smaller firms in the global MAX supply chain, reports Supply Management (Dec. 17, 2019).
Boeing had 4,545 MAX orders in backlog as of November and had been building the aircraft at a rate of 42 a month since April (down from 52/month). Many suppliers had said they favored Boeing maintaining some production, citing the risk of losing workers in a tight labor market during a halt. They said furloughing staff and stopping machinery would be harder than lowering production, and that restarting assembly lines would be costly.
One industry expert stated: “The decision to suspend production of the 737 Max is a largely unprecedented move and with the highest volume production of any large aircraft, the fallout across the global supply chain is going to be significant. The main problems for suppliers will be under-utilization of labor and machinery. Many suppliers have significant capital investment tied up in production capacity for the 737 Max program and they won’t be able to afford to keep this sitting idle for long.”
Classroom discussion questions:
- Do a SWOT analysis on this decision.
- Identify the top 5 suppliers that will be impacted.