Boeing supplier’s labor vote puts 737 output hike at risk
Boeing’s largest supplier is racing to avoid a potentially crippling strike, a disruption that would jeopardize the U.S. planemaker’s effort to increase production of its cash-cow 737 jetliners.
Spirit AeroSystems is preparing to make a so-called best-and-final offer this week to about 6,000 unionized employees at its Wichita, Kan., home base.
Members of the International Association of Machinists and Aerospace Workers plan a June 21 vote on the proposal and, depending on the outcome, could go on strike at midnight on June 24.
The sides are at loggerheads over wages, mandatory overtime and a management plan to gut traditional health-care insurance, said Cornell Beard, president of IAM’s District 70, which represents IAM members across Kansas.
“The company is again telling us what a bad position they’re in,” Beard said in an interview. “Every time there’s a sacrifice to be made, we’re the ones to make it.”
A work stoppage could have far-reaching implications for Boeing and its European rival Airbus – also a customer of cash-strapped Spirit – at a time when their factories are straining to keep pace with soaring jet sales.
After 15 years of labor peace at aerospace manufacturers in the U.S., investors may be tuning out the risks of a strike, said Kristine Liwag, an analyst with Morgan Stanley.
“This labor agreement is a very large catalyst because the market assumes the contract talks will get settled,” Liwag said in an interview. “Is the market underpricing the risk?”
Spirit, carved out from Boeing in 2005, makes most of the 737 Max jet’s frame in Kansas and sends the fuselages 1,800 miles by rail to Seattle-area assembly lines.
The single-aisle aircraft is Boeing’s top seller and provided about 70% of its first-quarter revenue, according to George Ferguson, an analyst with Bloomberg Intelligence.
Chief Executive Officer Dave Calhoun aims to gear up 737 output by 23% to a 38-jet monthly pace by midyear.
The Wichita complex also makes engine pylons for the Airbus A220 narrow body and the carbon composite nose section of Boeing’s 787 Dreamliner. A strike would be “very disruptive to Boeing,” Liwag said.