After stockpiling hundreds of grounded 737 MAX jets, Boeing announced that it will suspend production of the planes in January.
But the company added that it won’t lay off or furlough the thousands of workers who assemble the 737 MAX at its factory in Renton, Wash. “It is our plan that affected employees will continue 737-related work, or be temporarily assigned to other teams in Puget Sound,” Boeing said in a statement.
The suspension of production comes months after two catastrophic accidents involving 737 MAX jets in Indonesia and Ethiopia killed hundreds of passengers and raised deep questions about the planes’ safety.
Investigators traced the root cause to an automatic control system that pushed the planes into deep, unrecoverable dives due to faulty sensor data. Boeing says it has developed a software patch that should resolve the problem, but the Federal Aviation Administration has not yet signed off on the fix.
Once the FAA recertifies the planes, it could take weeks or months longer for Boeing to install the new software and train pilots. In the meantime, 737 MAX planes are grounded worldwide, and Boeing has held up on delivering orders.
Boeing’s Renton workforce has continued to produce scores of planes every month, however, and those aircraft have had to be put in storage in locales ranging from Seattle to California and Texas.
The company said the decision to suspend production was made as part of an ongoing assessment process.
“This decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft,” Boeing said.
Although the plan to reassign 737 MAX employees to other teams will take much of the sting out of the suspension for Boeing workers, it’s less clear what the effect will be on the thousands of other aerospace workers employed at other companies in the supply chain.
For now, the suspension is indefinite. The most recent best guess suggested that the FAA’s certification could come in February. But last week, FAA Administrator Stephen Dickson reportedly warned Boeing CEO Dennis Muilenburg not to make optimistic statements about plans for the return to service.
Boeing said it would hold off on discussing the financial impact of the suspension until late next month, when fourth-quarter earning results are announced. The company’s share price declined 4% today to finish the trading session at $327, and the price continued to edge downward in after-hours trading.
Separately, Muilenburg announced that Boeing’s board of directors declared a regular quarterly dividend of $2.055 per share.
Here’s the statement that Boeing sent out from its Chicago headquarters relating to the suspension:
“Safely returning the 737 MAX to service is our top priority. We know that the process of approving the 737 MAX’s return to service, and of determining appropriate training requirements, must be extraordinarily thorough and robust, to ensure that our regulators, customers, and the flying public have confidence in the 737 MAX updates. As we have previously said, the FAA and global regulatory authorities determine the timeline for certification and return to service. We remain fully committed to supporting this process. It is our duty to ensure that every requirement is fulfilled, and every question from our regulators answered.
“Throughout the grounding of the 737 MAX, Boeing has continued to build new airplanes and there are now approximately 400 airplanes in storage. We have previously stated that we would continually evaluate our production plans should the MAX grounding continue longer than we expected. As a result of this ongoing evaluation, we have decided to prioritize the delivery of stored aircraft and temporarily suspend production on the 737 program beginning next month.
“We believe this decision is least disruptive to maintaining long-term production system and supply chain health. This decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft. We will continue to assess our progress towards return to service milestones and make determinations about resuming production and deliveries accordingly.
“During this time, it is our plan that affected employees will continue 737-related work, or be temporarily assigned to other teams in Puget Sound. As we have throughout the 737 MAX grounding, we will keep our customers, employees, and supply chain top of mind as we continue to assess appropriate actions. This will include efforts to sustain the gains in production system and supply chain quality and health made over the last many months.
“We will provide financial information regarding the production suspension in connection with our 4Q19 earnings release in late January.”