The Supply Chain Matters blog provides a further update to our readership regarding an ongoing developments related to Boeing’s 737 MAX supply network, along with its implications.
As we have continually noted in prior Boeing 737 MAX updates, one of Boeing’s largest suppliers is Spirit AeroSystems, which provides most of the fuselage and other select airframe components for the 737 MAX.
Modified Supply Agreement with Boeing
Last week, Spirit reported a renegotiated a new supply deal with Boeing.
According the announcement, the revised agreement calls for limited production this year to include production support for 216 total aircraft. Negotiations are reportedly ongoing and hinge on Boeing’s to restart monthly production.
The announcement indicates in-part:
“Under the agreement, Spirit will restart production slowly, ramping up deliveries throughout the year to reach a total of 216 MAX shipsets delivered to Boeing in 2020. Spirit does not expect to achieve a production rate of 52 shipsets per month until late 2022. The parties are continuing to negotiate other terms.”
For reference purposes, prior to the 737 MAX production shutdown in January 2020, Spirit was supporting a 737-family monthly production rate of 52 aircraft per month even though actual MAX production had been scaled back to 42 aircraft monthly after the global grounding of the aircraft. The extra shipsets were continued in order for Spirit to be able to build momentum for Boeing’s 2020 planned monthly production milestone increase.
Last week, in its reporting on the Spirit modified supply agreement The Wall Street Journal indicated that Boeing has communicated to suppliers that it expects to restart “low-rate” MAX production around two months prior to securing regulatory approval for the aircraft to resume or enter commercial service, which is expected to be mid-year.
Further disclosed is that the monthly production rate increase of 52 aircraft to 57 aircraft, originally targeted for this year, will not happen until or before the year 2023.
The implication of supporting 216 shipsets for the remainder of this year thus implies a scaled-down Spirit monthly production cadence for the remainder of this year, and perhaps involving the supply network as well, dependent on Boeing’s ongoing supplier deliberations. The implications to Boeing’s broader 737 MAX supplier network are indications that ongoing supplier discussions center on an interim scaled-back monthly cadence once the decision to resume production is made, and to whether suppliers will receive any additional financial considerations relative to the current production suspension.
Further Potential Development
The Wall Street Journal reported today that Boeing potentially faces a new challenge related to the MAX aircraft design.
Validating a prior New York Times report indicating that Boeing engineers revealed a potential concern related to a wiring harness placement in the tail assembly of the aircraft, the WSJ indicated that technical experts at the European Union Safety Agency are indicating that they will require the manufacturer to relocate the wiring out of concern for potential short circuits.
Citing informed sources, the report indicates that both FAA managers and Boeing engineers are now indicating that moving the wiring is not necessary. Without some resolution among the two safety regulators, the Europeans agency could either further delay the FAA’s timetable for recertification of the aircraft or require Boeing to comply with the European demand.
Again citing sources, the reported compromise position is noted as requiring Boeing to correct the wiring placement on the upwards of 400 completed aircraft parked among various airfields surrounding Boeing’s production facilities, while allowing aircraft previously delivered and operational with air carriers to perform a risk analysis as to whether wiring should be repaired before being flown again, or during subsequent scheduled routine maintenance. The report indicates that relocating the wiring could take upwards of two weeks per aircraft.
This reported design glitch comes after the previously disclosed discovery of a new software issue related to the aircraft’s MCAS flight control system. That glitch reportedly involves prior software modifications that now prevent the aircraft’s flight control system from successfully powering-up and verifying ready for flight.
How this year’s timing of:
1) the resolution of ongoing new discoveries of design glitches to the satisfaction of global-wide air safety regulators,
2) the actual global-wide aircraft re-certification date,
3) coupled with the initial and subsequent two-year monthly production rate,
will determine the overall short and longer-term financial and operational impacts to Boeing’s 737 supply network partners.
Whether the production suspension is short-lived, and whether it will take an additional two years to achieve the original 2020 milestone of 57 aircraft per month are the basis of the subsequent financial and resource impacts for Boeing’s suppliers and to customers seeking delivery of unfilled backlogged orders.
Obviously, ongoing developments remain very fluid and far reaching.
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