As Boeing Co prepares to shutter much of a huge factory near Seattle that builds the grounded 737 MAX jet, the economic hit is reverberating across the US in places such as Wichita, Kansas; Stamford, Connecticut; and Cincinnati, Ohio.
Those cities are home to some of 900 companies worldwide that supply parts for the troubled plane, which analysts say is the largest manufactured product exported from the US.
Boeing does not plan to lay off any of the 12,000 workers at its factory in Renton, Washington.
Photo: Reuters
However, smaller parts companies, such as Wichita-based Spirit AeroSystems Holdings Inc, might not have that luxury. They could be forced to cut employees and some might even get pushed out of business.
With 13,500 workers, Spirit is the largest employer in Kansas’ biggest city. It gets half of its revenue from making fuselages for the 737.
Even though MAX production had slowed earlier in the year, Spirit and other suppliers continued to crank out parts, putting many of them in storage. As of Friday last week, Spirit had 90 fuselages on a ramp adjacent to nearby McConnell Air Force Base.
CFM International SA, a joint venture between General Electric Co and France’s Safran SA, which makes the MAX engines, also faces uncertainty.
The Cincinnati-based firm on Tuesday said that it is working with customers and other suppliers “to mitigate the impact of the temporary shutdown of the 737 MAX production.”
The company, which has more than 80 manufacturing sites worldwide with about 50,000 workers, said it can move people and manufacturing across multiple engine programs. That might hold off any layoffs.
CFM produces other engines for commercial and military aircraft.
Stamford-based Hexcel Corp, which makes composite materials used on the 737 MAX frame and engines was already reporting lower sales after Boeing slowed the rate of MAX production.
On Tuesday, the company tried to sound hopeful, saying it was confident in the airplane’s long-term success and looked forward “to its return to flight and gradual ramp-up in production during 2020.”
The 737 MAX is such a big product that by itself, the production hiatus would shrink US GDP by about 0.5 percent in the first quarter of next year, JP Morgan Chase & Co economist Michael Feroli said.
That could cut the US economy’s growth rate by about a quarter to 1.5 percent.
Joseph Brusuelas, chief economist for RSM, a tax advisory and consulting firm, predicted layoffs by suppliers and wrote in a note that some might have trouble staying in business.
“It cannot be overstated just how important the domestic and global supply chains associated with Boeing are to the small and medium-sized firms,” Brusuelas wrote.
CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’ US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said. Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said. He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation. Trump has claimed that Taiwan took up to
A start-up in Mexico is trying to help get a handle on one coastal city’s plastic waste problem by converting it into gasoline, diesel and other fuels. With less than 10 percent of the world’s plastics being recycled, Petgas’ idea is that rather than letting discarded plastic become waste, it can become productive again as fuel. Petgas developed a machine in the port city of Boca del Rio that uses pyrolysis, a thermodynamic process that heats plastics in the absence of oxygen, breaking it down to produce gasoline, diesel, kerosene, paraffin and coke. Petgas chief technology officer Carlos Parraguirre Diaz said that in
SUPPORT: The government said it would help firms deal with supply disruptions, after Trump signed orders imposing tariffs of 25 percent on imports from Canada and Mexico The government pledged to help companies with operations in Mexico, such as iPhone assembler Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), shift production lines and investment if needed to deal with higher US tariffs. The Ministry of Economic Affairs yesterday announced measures to help local firms cope with the US tariff increases on Canada, Mexico, China and other potential areas. The ministry said that it would establish an investment and trade service center in the US to help Taiwanese firms assess the investment environment in different US states, plan supply chain relocation strategies and
Japan intends to closely monitor the impact on its currency of US President Donald Trump’s new tariffs and is worried about the international fallout from the trade imposts, Japanese Minister of Finance Katsunobu Kato said. “We need to carefully see how the exchange rate and other factors will be affected and what form US monetary policy will take in the future,” Kato said yesterday in an interview with Fuji Television. Japan is very concerned about how the tariffs might impact the global economy, he added. Kato spoke as nations and firms brace for potential repercussions after Trump unleashed the first salvo of
RSS