Aerospace suppliers: If Boeing halts production, so will we

MUKILTEO — Just when business began to pick up at a Mukilteo aerospace company, the COVID-19 virus hit.

New Tech Industries was reeling from Boeing’s decision earlier this year to temporarily suspend production of the troubled 737 Max. The aerospace tool-maker furloughed a dozen of its 38 employees and slashed the workweek to 24 hours.

In recent weeks, New Tech regained some footing. “We were back up to 32 hours and 36 employees,” said Gina Morken, who owns the company with her sister, Carmen Evans, and their mother.

Now Morken worries that Boeing could suspend production at the massive Everett assembly plant — or stumble financially.

“If Boeing shuts down, we shut down,” she said.

Some Boeing workers are lobbying for the company to close the Everett assembly plant for at least 14 days to slow the COVID-19 outbreak. Despite official assurances, a wide range of Boeing employees say the company isn’t doing enough to protect workers on the factory floor from infection.

Every day, The Daily Herald receives emails from workers describing uncleaned work spaces, shoulder-to-shoulder work in tight quarters and new coronavirus infections. There are at least 12 confirmed cases of COVID-19 at Boeing’s Puget Sound locations.

While Boeing says it has no plans to suspend production at the Paine Field assembly plant or elsewhere, the company is asking the Trump administration for a $60 billion bailout. That request has called the jetmaker’s financial health — now and in the future — into question. Demand for new airplanes might not rebound for several years, even after the COVID-19 crisis passes, some industry experts say.

The Chicago-based company claims government aid is needed to shore up operations and the nation’s aerospace industry, and by extension the airline industry, which has seen demand for travel evaporate.

With or without a bailout, aerospace firms like New Tech Industries are concerned that Boeing could temporarily shutter the Everett campus or be unable to pay suppliers.

Said the president of another supplier, who asked not to be named so he didn’t alarm his employees: “If they’re not building any airplanes, they’re not going to be needing any parts. I would think the bailout would help Boeing continue to build planes to the level they need to, but if customers don’t need planes, they don’t need planes.”

Boeing alone employs more than 35,000 workers at the Everett campus, where the 747, 767, KC-46, 777 and 787 are assembled. Thousands more are employed by Washington’s 1,500 aerospace firms, including 200 companies in Snohomish County.

“Many suppliers are here because Boeing is here,” said Patrick Pierce, CEO of Economic Alliance Snohomish County. “It’s a huge piece of the region’s — the state’s — economy that needs to be at the top of our mind. We need to do whatever it takes to keep building airplanes into the future.”

To weather the 737 Max crisis — the Renton-built jet is grounded for a year after two deadly crashes — New Tech and other aerospace companies turned to Washington’s SharedWork program and placed employees on a standby status, which allows workers to receive full unemployment benefits without being required to search for a new job — the idea being that an employer will call them back to work when business picks up.

Due to COVID-19, that state program received 15,000 applications last week, a 500% increase over its usual volume, state officials say.

“We’ve been talking about how a shutdown would work,” said Morken of New Tech. “We would probably put employees on the standby unemployment program and we would continue to keep paying their health insurance.”

“But if there’s no money coming in, I don’t know how long we can do this,” she said.

New Tech applied this week for a federal Small Business Administration loan to help with operating costs. Suppliers also hope the Trump administration and Congress approve a stimulus package for Boeing.

In a company statement, Boeing said government aid “will be one of the most important ways for airlines, airports, suppliers and manufacturers to bridge to recovery.”

“Funds would support the health of the broader aviation industry” including “payments to suppliers to maintain the health of the supply chain,” the company said.

“The long term outlook for the industry is still strong, but until global passenger traffic resumes to normal levels, these measures are needed to manage the pressure on the aviation sector and the economy as a whole. We’re leveraging all our resources to sustain our operations and supply chain,” Boeing said.

Critics of a bailout point to the jetmaker’s focus on profit over safety, executive pay and stock buy-backs to boost share price — money that could otherwise be poured into research and development.

It “is unconscionable that Boeing seeks a government bailout while shareholders get dividends and the CEO keeps salary,” said Scott Hamilton of Leeham News, a Bainbridge Island consulting firm.

Still, Hamilton concedes, “the threat to Boeing from what’s happening to the airlines is real. What’s a threat to Boeing is a threat to suppliers across the country and a threat to the economy.”

Bill Ackman, of Pershing Square Capital Management, told CNBC this week, “Boeing is on the brink. Boeing will not survive without a government bailout.”

Bailout or no, Boeing and other manufacturers are wrestling with how — and whether — to continue production as the virus advances. The auto industry has closed North American plants through the end of the month.

Assembly work can’t be done at home. Manufacturing depends on hands-on labor to build and package goods.

“We are lucky, most guys can just stay at their machine and it is easy to limit interaction with each other and keep a safe six feet from each other. We have provided sanitizing wipes and put hand sanitizer around the shop,” Morken said.

Still, “if we did have a case” of coronavirus, “we’d shut down for a minimum 14 days,” Morken said.

“Our first priority is to keep our employees safe,” she said. “If we can’t keep them healthy, there is no coming back.”

Janice Podsada; jpodsada@heraldnet.com; 425-339-3097; Twitter: JanicePods