The already-stressed commercial aerospace supply chain just experienced unexpected turmoil.
Boeing’s (Ticker: BA) key supplier, Spirit AeroSystems (SPR), announced the suspension of factory operations after the International Association of Machinists and Aerospace Workers voted against a new employment contract that included wage increases of nearly 8% a year for workers planned for the next four years.
“We are disappointed that our employees, represented by the IAM, rejected our four-year contract offer and voted to go on strike,” said part of Spirit Aero’s statement. “We believe that our fair and competitive offer recognizes the contributions of our employees and ensures we can successfully meet our customers’ increasing demand for aircraft.”
The union sees it differently. “The dedicated and hardworking IAM membership at Spirit AeroSystems has performed impeccably during turbulent times, including a pandemic that has brought everything to a halt,” an IAM spokesman said in an emailed statement. “Most of our members have concluded that the Company’s offer is unacceptable…[we] will regroup and begin planning the next steps to bring the business back to the table.”
Spirit Aero and the IAM did not immediately respond to a request for comment on when negotiations would resume.
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Both Boeing and its rival Airbus (AIR.France) have tried to ramp up production to meet rising demand. It was’nt easy. Skilled workers left the industry during the pandemic and suppliers struggled to attract and reskill talent.
Both want production to increase to a total of 2,000 jets per year in the coming years. The best year ever for commercial aircraft deliveries was 2018 with about 1,600. In 2020, amid the pandemic and the global grounding of the Boeing 737 MAX, only 753 jets were delivered after two deadly crashes. Wall Street is forecasting nearly 1,300 combined shipments in 2023, and more than 1,800 by 2026.
The strike will not help. Spirit Aero supplies approximately 70% of Boeing’s narrow-body aircraft, defense and business aircraft structures. If the strike lasts too long, production of the 737 MAX will be impacted.
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“We continue to monitor the situation and support our valued supplier,” Boeing Barron’s said in an emailed statement.
Spirit Aero stock closed down 9.3%, while the S&P 500 gained 0.4% and the Dow Jones Industrial Average closed flat.
Boeing shares fell 3.1%. Shares in Airbus, another Spirit Aero customer, fell 1.7% in overseas trade.
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The suspension seems to eclipse the positive news from the Paris Air Show, which continued on Thursday. The two aircraft manufacturers have announced orders for more than 1,000 jets in the past few days.
Write to Al Root at [email protected]