Commercial aerospace manufacturer’s Airbus and Boeing, and their respective supply networks, have both been buffeted by the direct and indirect impacts of the ongoing COVID-19 coronavirus global outbreak.
Boeing announced this afternoon that the aircraft manufacturer will be temporarily shutting down Puget Sound based production operations, including its Renton and Everett Washington facilities for 14 days, starting on March 25. According to local news outlets, there are upwards of 70,000 employees affected by this move.
The action comes after the Seattle Times reported that a worker at the complex died from the virus, while 25 workers based in the manufacturing complex have also tested positive for the virus as of Monday.
The company indicated to local outlets that during the shutdown there will be deep cleaning activities conducted among facilities while rigorous criteria will be developed for employees returning to work. Employees unable to perform work at home will reportedly be granted paid leave for the ten days of suspension. A skeleton workforce will remain among facilities to support security and storage of finished aircraft.
Boeing’s CEO of Commercial Aircraft further indicated in a statement that the company’s production facility located in North Charlestown South Carolina will continue to be monitored to warrant if a similar action is needed.
Meanwhile, U.S. Congressional talks related to a massive injection of an added monetary and fiscal stimulus plan are rumored to contain some form of financial relief related to Boeing, as the company plows through its available cash resources. As Supply Chain Matters has indicated in a prior updates, the ongoing challenges related to the 737 MAX aircraft groundings continue to consume cash resources. Depending on which publication one reads, there are indications that Boeing has significant financial challenges, hence the effort to maintain production levels of aircraft to generate forms of cash payments.
With virus also inflicting unprecedented financial harm to global airline carriers, there is wide speculation that postponement or re-scheduling of new aircraft deliveries will be a reality.
Today’s announcement obviously provides implications for Boeing’s supply network ecosystem of suppliers in that the disruption will involve all aircraft production programs.
Rival Airbus is also dealing with the direct and indirect impacts of COVID-19.
Last week, the aerospace manufacturer shutdown production facilities in France and Spain for a four-day period as virus outbreaks among the two countries continued to increase.
A statement released yesterday indicated that the European plane maker would resume production and assembly work in France and Spain today, following health and safety checks. However, the company has indicated that production levels will be considerably reduced going forward. The manufacturer indicated to Reuters that workstations will only open when it is safe to do so, without saying how steeply its production would fall.
According to a published report by industry publication Aviation Week, the aerospace manufacturer; “is facing an avalanche of requests for delivery deferrals and is preparing for substantial production cuts as many of its customers struggle with the impact of COVID-19 on air transport.” Further, executives indicate that the logistics for airlines to take physical delivery has become increasingly difficult with travel bans and quarantine requirements.
Further reported is that steps are being taken to boost liquidity while having no plans in asking any European government for added financial help. But, Airbus has indicated that governments should be considering any needed financial support for airlines and supply chain partners, if indications warrant.
Last week, bot the manufacturer’s CEO and CFO indicated to reporters and analysts that the company has a strong balance sheet the liquidity available to cope with additional cash requirements. The company is temporary suspending a previously announced stock dividend program, as well as curtailing operational costs where possible.
Supply Network Implications
As stated earlier, the industry supply network implications of COVID-19 could be just or more significant, depending upon individual manufacturer’s, their respective suppliers and their global manufacturing footprints. Boeing appears to be the most impacted if only for the still ongoing financial and operational implications of the 737 MAX aircraft global grounding that has taken a financial toll before COVID-19 occurred.
General Electric announced today an expected 10 percent reduction in its global workforce. Thus far, specific details are lacking. Other announcements related to temporary production shutdowns are likely to follow over the coming days and weeks.
As we have noted in many of our blog commentaries related to this vibrant industry, in a New York minute, everything can change.
Indeed, with COVID-19 a robust order book is suddenly in great flux and efforts to increase the scale of monthly aircraft output are now very much uncertain.
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