Dec 19, 2019

Suspension of 737 MAX production expected to cut economic growth

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Boeing's plan to suspend production of its 737 MAX jets in January is expected to hit Q1 GDP growth, assuming the suspension lasts through the first quarter and that suppliers slow production.

By the numbers: Wall Street firms estimate the suspension could shave off as much as 0.6 percentage points from Q1 GDP.

  • Per MarketWatch, economists “were penciling in a 1.3% annual growth rate for the first quarter before Boeing’s production plans were updated.”
  • The expectation is that 737 production will eventually resume, making the GDP impact temporary. The question is how long Americans will have to wait for a bounce back.

Catch up quick: Boeing announced on Monday that the company would halt production of its 737s while it grapples with the ongoing issues that caused two fatal crashes and prompted the jet’s worldwide grounding. The company reduced production of the aircraft from 52 per month to 42 in April.

  • Those prior production cuts have already eaten into economic growth.
  • What they’re saying: “By our estimation, the halt in deliveries of the 737 MAX last March and the cut in production last April ... together lowered real GDP about $10 billion below baseline," according to analysts at IHS Markits, who estimate Boeing’s production halt could lower Q1 growth by a half percentage point.

Between the lines: Decelerated business for suppliers and manufacturers has been an immediate concern.

  • Boeing says it will attempt to avoid completely disrupting supplier relationships, and the company may continue to accept parts while waiting to restart production.

Go deeper... Full list: All the countries that have suspended the Boeing 737 MAX

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The fallout from Boeing's 737 MAX suspension could have a big impact

Boeing 737 MAX aircrafts on Oct. 23, 2019. Photo: David Ryder/Getty Images

After it laid off 2,800 employees last week, citing "ongoing uncertainty" related to Boeing’s 737 MAX jet, Moody's downgraded the secured debt of airplane parts supplier Spirit AeroSystems and handed it a Ba2-PD Probability of Default rating.

What it means: Wichita, Kansas-based Spirit gets about half of its annual revenue from supplying parts for the MAX, which has been grounded for months following two fatal crashes and remains in a production halt indefinitely.

Go deeperArrowJan 14, 2020

Boeing supplier to lay off more than 20% of its workforce in Kansas

Photo: Nicolas Economou/NurPhoto via Getty Images

Boeing supplier Spirit AeroSystems announced Friday it will lay off more than 20% of its workforce in Wichita, Kansas, just one day after documents were revealed confirming that Boeing employees had raised concerns about the 737 MAX's safety, AP reports.

Why it matters: The roughly 2,800 layoffs are a sign that Boeing's difficulties are beginning to ripple out, AP writes. Spirit AeroSystems, Wichita's largest employer, cites the "ongoing uncertainty" surrounding Boeing's 737 MAX jet as the primary reason for the layoffs, the Washington Post notes.

Go deeperArrowJan 11, 2020

Boeing CEO Dennis Muilenburg is out

Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Boeing announced Monday that CEO Dennis Muilenburg has resigned effective immediately after its board of directors "decided that a change in leadership was necessary to restore confidence."

Why it matters, via Axios' Dan Primack: The aftermath of the aircraft maker's twin 737 MAX crashes, which killed 346 people, laid bare a culture in which safety concerns were discounted — and federal regulators were treated as little more than malleable rubber stamps.

Go deeperArrowDec 23, 2019