CHICAGO/WASHINGTON – Boeing Co. has restarted production of its beleaguered 737 Max jetliner, ending a four-month shutdown, as the planemaker works with regulators to end a global grounding that has hurt sales and damaged its reputation.
The company also said Wednesday it was eliminating more than 12,000 U.S. jobs, including the involuntary layoffs of 6,770 U.S. workers, as America’s largest planemaker restructures in the face of the coronavirus pandemic.
Output of the Max resumed at a low rate as employees focused on improving quality and streamlining the way the plane is built, Boeing said in a statement. The company halted work at its Seattle-area plant in January, citing uncertainty over when regulators would lift a flying ban imposed in March 2019 after two crashes killed 346 people.
Teams started to “warm up” the center of three production lines at the factory, using new processes intended to eliminate out-of-sequence work along with the rash of tools, rags and other debris that have turned up in completed aircraft, Stan Deal, who heads Boeing’s commercial division, said in a note to employees.
“When we temporarily suspended 737 Max production, we made a decision to invest in our people and our factories to drive improvements in safety, quality and production stability,” Deal wrote. The manufacturer is rolling out more than a dozen initiatives aimed at improving safety and quality on its 737 assembly lines.
While the timing of the regulatory approval is still in question, Boeing has said it’s targeting the Max’s return in the third quarter. Michael O’Leary, the head of Ryanair Holdings PLC, told Bloomberg TV earlier this week that the model should return to service in North America by late September or early October. His airline, which is one of Boeing’s largest 737 customers, expects to take its initial Max deliveries in the fourth quarter, he added.
“Right now, the focus is on the software validation and technical documentation required for a certification flight,” Deal said of the regulatory process. “We look forward to resuming deliveries on our backlog of over 3,800 737 Max airplanes, while recognizing that the ultimate timeframe will be set by regulators.”
The Max will re-enter a market that’s changed vastly since the grounding. Airlines that were clamoring for the planes are now postponing deliveries to save cash as they ride out the sharp downturn that’s accompanied a global pandemic. Boeing also needs to nurse along suppliers reeling from shortages and financial uncertainty.
Spirit AeroSystems Holdings Inc., which manufactures about 70 percent of the Max, started work earlier this month. Under a recent agreement, it will ship 125 Max frames to Boeing this year. That’s fewer than the 216 fuselages that Boeing had requested before the virus outbreak.
On jobs, Boeing disclosed it plans “several thousand remaining layoffs” in the next few months but did not say where those would take place.
The company announced in April it would cut 10 percent of its worldwide workforce of 160,000 by the end of 2020. Boeing said Wednesday 5,520 U.S. employees will take voluntary layoffs and leave in the coming weeks. Boeing also disclosed it is notifying 6,770 workers this week of involuntary layoffs.
Chief Executive Dave Calhoun told employees in an email the “pandemic’s devastating impact on the airline industry means a deep cut in the number of commercial jets and services our customers will need over the next few years, which in turn means fewer jobs on our lines and in our offices. … I wish there were some other way.”
CFRA analyst Colin Scarola upgraded Boeing to buy and raised his price target to $174 (¥18,800) from $112 saying Boeing “can weather its current crises and grow over the long term.”
In April, Boeing recorded zero orders for the second time this year and customers canceled another 108 orders for its grounded 737 Max plane, compounding its worst start to a year since 1962.
Last month, Boeing raised $25 billion in a bond offering that allowed the company to avoid taking government aid.
The aerospace sector has been hit particularly hard, damaging many Boeing suppliers.
General Electric Co said this month it planned to cut its aviation unit’s global workforce this year by as much as 25 percent, or up to 13,000 jobs.
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