WICHITA, KS – Problems for Boeing and its troubled 737 Max aircraft, which appear to be growing deeper, have begun to ripple outward, with a major supplier announcing Friday that it will lay off more than 20% of its workforce in Kansas, where it is based.
The announcement of 2,800 layoffs at a major employer in Wichita, the state's biggest city, came a day after documents became public showing that Boeing employees raised doubts about the safety of the 737 Max, apparently tried to hide problems from federal regulators, and ridiculed those responsible for designing and overseeing the jetliner.
The layoffs threaten to damage a state economy that has been solid for months, with low unemployment and better-than-anticipated state tax collections. Democratic Gov. Laura Kelly and the Republican-controlled Legislature have been able to boost spending on public schools and services, and the layoffs are likely to come up during the state's annual session, which starts Monday.
Spirit AeroSystems is the largest employer in Wichita, which bills itself as the "Air Capital of the World" due to a heavy concentration of aerospace manufacturers. More than 40 aerospace companies, most of them in and around Wichita, provide parts and services for the production of the 737 Max.
The governor's administration had been considering the use of the state's fund for unemployment benefits to pay part of the salaries of Spirit workers so they could remain in their jobs.
Spirit's announcement also came on the same day that the jobs report shows U.S. manufacturers cut payrolls by 12,000 in December, compared to estimates for a gain.
Spirit produced about 70% of the 737 Max, including the fuselage. Contracts with Boeing for the Max represents more than half of Spirit's annual income.
"The difficult decision announced today is a necessary step given the uncertainty related to both the timing for resuming 737 production and the overall production levels that can be expected following the production suspension," Spirit AeroSystems CEO Tom Gentile said in a prepared statement.
Employees will be paid for a 60-day notice period. Affected employees will leave the company beginning Jan. 22.
Just days ago, Spirit broached the subject of voluntary buyouts with employees. The company suspended production of fuselages and other parts for the Max on Jan. 1, after Boeing ordered Spirit to suspend shipments.
Spirit plans to implement smaller workforce reductions this month for its plants in Tulsa and McAlester, Oklahoma.
Cornell Beard, president of the local branch of the International Association of Machinists and Aerospace workers, said the union was meeting with the company to find ways to lessen the impact of the situation as much as possible.
“It’s an extremely difficult time for the workers at Spirit AeroSystems who have dedicated their lives to making this company a leader in aerospace. Machinists members and their families in this community have some tough decisions in front of them," Beard said.
The company said it has taken steps to lessen the impact by transferring some 737 Max employees to other programs and facilitate job fairs to help laid-off employees.
Spirit’s stock price was down in midday trading Friday. It already had lost more than 20% of its value since Boeing grounded the 737 Max in March.
Moody’s Investors Service on Friday put Spirit's credit rating under review for a possible downgrade. Spirit is one of four Boeing suppliers being reviewed by Moody's, which said much depends on how long the shutdown lasts.
Dozens of smaller aerospace companies are also beginning to shed jobs.
Sen. Jerry Moran, a Kansas Republican, said he will work with business leaders and Trump administration officials to see that the layoffs have a "short-term impact." He said he has spoken directly with Trump and Vice President Mike Pence about the layoffs. He said he also spoke this week with the incoming Boeing CEO and the FAA's administrator about doing everything necessary to get the 737 Max back safely in the air.
"The layoffs announced today at Spirit AeroSystems have dealt a harsh blow not only to the company but also to Spirit suppliers and subcontractors," he said. "I plan to continue working with the administration and Department of Defense to showcase the capabilities of Wichita manufacturers in an effort to diversify the industry and bring more job opportunities to the region.”
Aerospace employment in Kansas peaked in 2008, followed by a continual decline until 2017, said Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University. Kansas then had a big ramp-up in aerospace jobs in 2018 and 2019.
“We are losing a lot of that growth and we are back at our bottom,” Hill said.
The loss of the 2,800 Spirit jobs is expected to have an impact of just under 5,800 jobs in the economy, he said, noting that other aerospace manufacturers in the supply chain have been announcing layoffs.
The average aerospace worker makes $81,000 annually, and the loss of the 2,800 jobs accounts for lost wages of $220 million, assuming those workers are not rehired within 12 months, Hill said.
Kansas Gov. Laura Kelly promised an “all-hands-on-deck approach across state government” to help Spirit, its workers and other affected businesses. She said state Labor Secretary Delia Garcia would be in Wichita in the coming days to lead the state’s response and work closely with local and federal agencies.
“We stand in lockstep with the workers and companies affected,” Kelly said in a statement.
Rep. Ron Estes, whose congressional district includes Wichita, said he will continue to work with the Federal Aviation Administration “to ensure grounded aircraft causing these furloughs can safely return to the skies without any unnecessary delays.”
Rep. Sharice Davids, a Kansas Democrat who serves on the House Transportation Committee, descried the newly released messages from Boeing employees to deceive the public and regulators.
"In addition to the public safety concerns these messages raise, Boeing’s callousness has now cost thousands of Kansans their livelihood and endangered the economy of our state, which is dependent on aerospace," Davids said in a statement.
Kansas' other senator, Republican Pat Roberts, issued his own statement of support for the workers, saying: “While these furloughs will affect a large part of the aerospace workforce in Wichita, I know the community is prepared to assist in every way possible. Wichita is the Air Capital of the World, and I am committed to making sure that does not change.”
John Hanna in Topeka, Kansas, contributed to this report.