Spirit Aero Halts Work For Boeing, Furloughs Workers, Warns Of More
With key customer Boeing recently suspending much of its own work indefinitely to try to deep-clean amid the novel coronavirus outbreak, Wichita-based Spirit AeroSystems announced April 8 it has also practically halted production for Boeing programs performed at its headquarters and in Oklahoma for an indefinite period of time.
For Spirit workers, the company initiated a new, 21-calendar-day furlough of production workers and managers supporting Boeing programs in Wichita and Tulsa and McAlester, Oklahoma. It also implemented an indefinite four-day workweek for its salaried workforce in Wichita. Spirit work for Airbus, end-customers in the U.S. Defense Department and other non-Boeing work will continue at these facilities. All U.S.-based executives will also take a 20% pay cut until further notice.
The new actions come on top of those Spirit started shortly after Boeing halted production of the 737 MAX in January. That included laying off 3,200 workers in Wichita and Oklahoma, cutting its stock dividend to a penny a share and suspending share buybacks, among other actions.
“Spirit has enacted a robust crisis management and response process as part of our enterprise risk management program to help us navigate the challenges we face due to the COVID-19 pandemic,” Spirit CEO and President Tom Gentile said. “We are proactively taking steps to ensure the safety of our team as we maintain operations to support our customers, including the critical work we do on national security programs.”
In the latest announcement, Spirit warned that more workforce reductions could come as the company and the aerospace industry wrestles with the unprecedented fallout of the COVID-19 crisis, especially if Airbus and Boeing cut production rates for large commercial aircraft. Numerous financial analysts and industry advisers expect rate reductions will be announced in the coming days.
In recent days, Boeing has halted work at its Puget Sound factories in Washington state and at its Charleston, South Carolina, area sites.
Jefferies analysts noted after Spirit’s latest announcement they were in the midst of their data analysis for investor clients on Spirit, including a potential 30% production cut in 2020.
Spirit said it believes that due to its variable cost structure, it has the ability to take further actions to address future market developments. “Based on current business conditions, Spirit believes that it is well positioned to manage its liquidity through this challenging and unprecedented situation,” the company said.
Spirit said as of April 2, its cash balance was $1.83 billion, down from $2.35 billion at the end of 2019. Used-up cash included $120 million paid for the Jan. 10 acquisition of Fiber Materials, which adds to Spirit’s budding defense work with high-temperature materials expertise for hypersonics and other uses. But Spirit faces planned closures on acquisitions of Asco and Bombardier assets, which the Jefferies group said could lower Spirit’s cash on hand to just around $900 million, assuming nothing else turns for the worse.