Boeing sits atop a chain of more than 16,000 suppliers. These companies, making parts for Boeing jets, are shrinking rapidly in the wake of the travel downturn, writes The Wall Street Journal (Aug. 13, 2020). U.S. aerospace manufacturers have already shed more than 100,000 jobs since the start of the year, with the pandemic adding to existing pressures from the sharply reduced production of the still-grounded 737 MAX jet. The biggest supplier on the MAX program, Spirit AeroSystems (which makes fuselages), is cutting 8,000 jobs, around 40% of its commercial aerospace workforce. GE is shedding 13,000 from its aviation unit.
In addition to the MAX, the Boeing supply chain is taking other hits. The overall production of new jets has declined, and the big drop in flying—a 1/3 of the global fleet remains grounded—has reduced demand for spares and improvements such as new seats. The reduced workload comes as companies had invested in new equipment and hiring to support higher jet production and the steady rise in airline passengers, only for the pandemic to render their business plans irrelevant.
Boeing forecast that it would produce 240 planes this year, 2/3 lower than in 2019, and has had to twice reduce that forecast downward. It delivered just 4 jets in July and is producing only a dozen MAX a month, down 36 from a year ago. Before the pandemic, Boeing was supporting suppliers by ordering more parts than it needed and stockpiling them ahead of a planned increase in MAX production. That acceleration has failed to materialize so it has slowed orders.
Raytheon won’t start shipping parts for new MAX jets until the second half of next year. Safran, which also makes Boeing engines, said its commercial sales fell 66% last quarter. “We have a concern regarding the future of some of our suppliers and subcontractors because they are in crisis, too,” Safran’s CEO stated.
Classroom discussion questions:
- What supply chain dangers is Boeing facing?
- What can it do at this point?