Smaller Boeing supplier laments new disruptions involving 737 aircraft – Reuters

© Reuters. A Boeing 737 Max aircraft moves along the runway at Renton Municipal Airport in Renton, Washington, USA, on January 10, 2020. REUTERS/Lindsey Wasson

Written by: Allison Lampert, Valerie Insinna, Abhijith Ganapavaram

SEATTLE (Reuters) – Rosemary and Larry Brester have run Hobart Machined Products since 1978, milling and grinding metal to make aircraft parts in a small building behind their home.

Hobart is one of Boeing’s (NYSE:) many suppliers around Puget Sound, Washington, and the Bresters are doubling their four-person workforce to meet Boeing’s ambitions to increase production of its best-selling 737 jet. That was the plan. . Hobart supplies parts to large corporations that sell directly to Boeing.

Those plans are currently up in the air after U.S. regulators curbed Boeing’s production due to panel ruptures on the mid-air jet, and the Bresters aren’t alone. Rosemary Brester said the incident risks further eroding trust and financial burden on Boeing’s most vulnerable suppliers, and that if Boeing’s problems persist, some of them could go out of business.

“I’m very concerned,” she said. “We have brought in equipment to support our growth strategy and delivery schedule. There are many other companies in our region and globally doing the same. Now we are all waiting to find out when we will be able to do that. “You can utilize both space and capacity.”

Boeing’s latest crisis comes after a panel explosion on an Alaska Airlines plane on January 5. Federal investigators are trying to determine the cause of the accident, which has prompted the Federal Aviation Administration to take drastic measures to limit Boeing’s production rate.

Many suppliers suffered from weak demand due to the pandemic and the 20-month shutdown of the Boeing 737 MAX 8, which temporarily halted production. For some, the events of January 5 have dampened optimism about a return on investment sparked by the recent travel boom that has revived aircraft orders.

Aircraft parts must be ordered up to one year in advance. Many suppliers expect to get paid later this year by adding staff and materials or operating at faster production rates. Now they face inventory build-up that will drain their cash.

“It will have a negative ripple effect throughout the Boeing supply chain, which is already struggling to expand,” said Eric Bernardini, chief aerospace expert at consulting firm AlixPartners.

The FAA’s order allows Boeing to continue producing the MAX jets, but it cannot increase current monthly rates until quality control issues discovered during the investigation are resolved. The FAA did not say how long the restrictions would last.

The FAA has not specified how many aircraft Boeing can produce each month, and Boeing has refused to confirm its current monthly rate, creating confusion about the limit. Boeing declined to comment.

Boeing said in October that 737 production would reach 38 units per month by the end of 2023. In a January 22 email seen by Reuters, Boeing instructed its suppliers to adhere to its master schedule for an increase to 42 aircraft per month in February.

One Boeing 737 MAX supplier said the production cap would allow it to catch up with work on other aircraft programs if it were for a limited period of time, but other suppliers would likely view the cap as a “pretty big deal.”

Glenn McDonald, a supply chain expert at AeroDynamic Advisory, said the uncertainty was particularly detrimental to small businesses investing in working capital to meet the announced production increases.

“A lot of providers were expecting rate increases in 2024, 2025,” he said. “Over the last three or four years, even the supply base’s confidence in Boeing’s rate announcements has been eroded.”

Spirit AeroSystems (NYSE:), already facing financial pressures, relies heavily on its MAX program. According to AeroDynamic, total aerostructure revenue in 2023 for supplier indices such as Spirit, GNK and others is approximately 80% of 2018 levels. Spirit said it will continue to work with the FAA and will also work with Boeing.

TNT Aerospace, a family-run business in Sumas, Wash., had considered joining the 737 program, but Boeing’s difficulties made Chairman Aaron Theisen think twice. “We need to have a strong foundation from which the business can grow,” he said.