In this 2019 photo, people work on the Boeing 737 Max 8 assembly line in Boeing’s 737 assembly facility in Renton. (AP Photo/Ted S. Warren, File)

In this 2019 photo, people work on the Boeing 737 Max 8 assembly line in Boeing’s 737 assembly facility in Renton. (AP Photo/Ted S. Warren, File)

Boeing goes on hiring spree in high-stakes gamble on 737 Max

Managers worry about not having enough workers when the company restarts output of the trouble plane.

By Julie Johnsson / Bloomberg

In the weeks before Boeing halted 737 Max production in January, company executives took a hard look at all the personnel who’d be left with little to do when the last jets rolled out of their Seattle-area factory.

The conclusion they came to, though, was surprising: The problem wasn’t that there’d be too many mechanics idly milling around for months on end, but rather too few of them.

Sure, there’d be a cost to having them on payroll, but what worried managers more was the thought of not having enough workers around when they finally restart output of the Max. That task will be made more difficult by the need to simultaneously maintain the hundreds of Max jets that Boeing built last year but was forced to keep in storage until airlines can start flying them.

So on Dec. 13, Boeing welcomed 115 new mechanics and assembly-line workers to its Pacific Northwest manufacturing hub. Another 122 new employees started Jan. 10, and 143 the week after that, while only 31 machinists left the company that month. All told, union figures show, Boeing has hired about 730 of these workers, a figure that is almost entirely net additions, according to IAM District 751, the company’s biggest labor union.

It’s a big gamble. Boeing executives currently plan to restart the factory in the next couple months, on the expectation that by around midyear regulators will lift the flight ban they imposed on the Max in early 2019 following two deadly crashes. If Boeing’s timetable proves too optimistic, as its earlier predictions have, the costs will pile up — not just from the new hires, but also from the 3,000 other Max assembly workers the company has kept on the payroll since shutting down production.

“There’s some major risks,” said George Ferguson, an analyst with Bloomberg Intelligence. “If you’re Boeing and you want a share of the market in the future, you’re going to need to make sure you go out and protect it now.”

To make matters worse, the push to ramp output back up comes just as concern is mounting that the coronavirus will curb air travel and dissuade airlines from taking the planes they’ve already ordered — let alone buying new ones. Boeing’s stock was hard hit in last week’s global equity sell-off, sinking 17%. It’s now down 37% over the past year.

Once Boeing starts to emerge from the Max crisis, it will need the extra employees to mount a commercial comeback for the plane — both in the factory and in the parking lots where the company and airlines have stored about 800 aircraft.

Without the new workers, labor shortages could disrupt Boeing’s production and enable Airbus SE to widen its lead in the crucial market for single-aisle jets.

There are already signs that some of Boeing’s suppliers are preparing to snap out of their hibernation. Spirit AeroSystems Holdings Inc., which jettisoned 3,200 jobs because of the production pause, said last week that it would resume making 737 Max fuselages for Boeing this month.

In the middle of March, with the Max’s grounding hitting the one-year mark, Boeing Chief Executive Officer Dave Calhoun is expected to speak before suppliers. Uncertainty and financial strain are starting to pile up at the partsmakers, posing another risk to Boeing.

While Boeing is spending heavily in anticipation of a Max comeback, it’s far from certain when or whether the strategy will pay off. The Chicago-based planemaker projected in January that it will absorb about $4 billion in “abnormal” costs related to the production halt, primarily in 2020. That’s on top of the $14.6 billion in other Max costs outlined by the company.

About 200 of the machinists hired by Boeing since December have been assigned to the 737 Max program, according to the company. More of the newcomers may be needed when Boeing starts up its 737 factory and the thousands of workers who have been lent to other programs “go back on the line,” said Ken Herbert, an analyst with Canaccord Genuity.

The recent Max hires are primarily tending to newly built planes that Boeing can’t deliver until the grounding ends. The parked narrow-body jets — taped up against the elements in storage lots in Texas and California as well as the Seattle area and an Eastern Washington airport in Moses Lake — represent about $20 billion of inventory for Boeing, Bloomberg Intelligence estimated.

Inside the 737 factory in Renton, the east and west final assembly lines have been empty since Boeing rolled out the last Max in January. There are still aircraft on the center line, frozen in place since production was shut down.

Engineers and mechanics are using that as a lab to study every step in making the plane to how the manufacturing flow can be streamlined and improved, Alder said. For example, the toolkits have been matched to the work that will be performed by every mechanic along the line for each two-hour segment of their day.

“We’ve maintained our staffing levels on the 737 program to focus on factory initiatives, while temporarily assigning some employees,” said Doug Alder, a Boeing spokesman.

But getting the Max production back into high gear will involve a delicate balancing act, since Boeing won’t want to add to its inventory of 400 or so planes built during the grounding and never shipped to customers. Then there’s the risk of disruption as the 600 suppliers who provide parts and structures for the Max make their own calculations as to when the plane will return — and whether they’ll be able to stay afloat until then.

Especially hard hit are smaller operators whose working capital was clipped when Boeing adopted 120-day payments several years ago, said aerospace consultant Kevin Michaels.

“If you’re a supplier that sees your revenue cut in half, that could be enough to put you out of business,” said Michaels, who is managing director of AeroDynamic Advisory. “It only takes one supplier to muck it up,” he added of the parts shortages that can cause production snarls.

Tool Gauge, which makes complex plastic and metal parts and assemblies for Boeing and other aerospace manufacturers, is among those anxiously monitoring Boeing’s plans for the 737.

The Tacoma, Washington-based company has built a new factory that more than doubles its footprint to 80,000 square feet and invested in automation. Now it is waiting for the payoff: a chance to rapidly scale its work on Boeing jets such as the Max and the 777X, which is months behind schedule.

“Is it stressful? Absolutely,” Jim Lee, Tool Gauge’s general manager, said at a supplier convention outside of Seattle last month. “More stressful than it’s ever been.”

Talk to us

More in Herald Business Journal

James Berntson shows how his farm uses a trellis system to control tomato plants on Tuesday, June 21, 2022, at Radicle Roots Farm in Snohomish, Washington. (Ryan Berry / The Herald)
Backyard business: Snohomish farm thrives on less than one acre.

James Berntson grew Radicle Roots Farm using smart crop planning and organic practices.

A group gathers near a blending pit, which is where cow waste and other biodegradable material begins its journey towards becoming energy in a digester Friday, June 17, 2022, in Monroe, Washington. (Ryan Berry / The Herald)
Cow pie power! Monroe manure-to-energy project expands

Qualco has been turning cow poop into electricity since 2008. A new generator could turn on by mid-August.

Fauxy Furr in Arlington, Washington upcycles boots with custom trimmings. Their boots proved popular with customers from overseas. Photographed on February 8, 2022.  (Kevin Clark / The Herald)
‘Accidental exporters’ can tap into federal and state funds

The SBA offers funds and expertise to small companies that hope to boost their export business.

Trays of plants grow inside one of Infarm's vertical farms. Photo credit: Infarm
Growing up: Indoor warehouse farms make inroads in Snohomish County

Vertical farms that use LED lights to grow fresh herbs and salad greens indoors are sprouting up.

Port of Everett hosting annual open house after pandemic hiatus

Also, Rustic Cork Wine Bar plans to open a second shop at Fisherman’s Harbor — the latest addition to the port’s “wine walk.”

Holly Burkett-Pohland, the owner of Burkett’s Home & Gift, outside of her new store front on Friday, June 17, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
New Everett gift store debuts in former J. Matheson space

For years, Holly Burkett-Pohland wanted to expand a business founded by her mother in 1978.

Striking Starbucks employees talk to a woman who wanted to use the drive-thru but was turned away due to the strike on Wednesday, June 15, 2022, on Broadway in Everett, Washington. Workers at the 37th and Broadway store spent their morning picketing because a fellow employee had been fired the previous day in what the workers believe is an act of union busting. (Ryan Berry / The Herald)
Everett Starbucks workers go on strike after employee fired

The employee and her fellow union members claim she was fired for supporting the union. Starbucks denies it.

Property values soar 32% in Snohomish County due to hot housing market

Assessed values are up all across the county since last year. The impact on tax bills won’t be known for a few months.

A Kenmore Air Cessna 208 Caravan. (Kenmore Air) 20220613
Kenmore Air to start daily flights from Paine Field to San Juans

Service begins July 14. Flights to Friday Harbor and Orcas Island airports take about 25 minutes.

Seattle Space Needle sues coffee chain over use of logo

The logo for Local Coffee Spot features a mug of hot coffee whose rising steam bears striking resemblance to the iconic tower.

Logo for news use, for stories regarding Washington state government — Olympia, the Legislature and state agencies. No caption necessary. 20220331
Foes of state’s capital gains tax drop plans for initiative

I-1929 sponsors say they are confident a lawsuit challenging the legality of the tax will be successful.

Smoother sailing: Arlington airport gets grant to fix runway

A $2.3 million federal grant will pave the way for a project to resurface the airfield’s main runway.