Halting 737 MAX output could dent GDP

Without wings and going nowhere, rows upon rows of 737 MAX frames sit idly in Wichita, Kansas at Boeing's largest supplier of parts for its troubled jet.

Sources tell Reuters that the plane manufacturer's decision to halt its MAX production line could lead to furloughs in the state, where this fuselage maker, Spirit AeroSystems, is located. With 17,000 people, Spirit makes roughly 70% of the 737's parts. The company declined comment.

Boeing's assembly line halt could have huge ripple effects on the overall U.S. economy and employment. The aerospace giant is the largest U.S. exporter. Economists say the output suspension would stop the surge in inventories, thereby cutting first quarter economic growth by at least half a percentage point. And it could push suppliers to layoff or furlough employees or cut their hours.


Atmosphere Research Group president, Henry Harteveldt:


SOUNDBITE: ATMOSPHERE RESEARCH GROUP PRESIDENT, HENRY HARTEVELDT, (ENGLISH) SAYING:

"For Boeing to announce that it could suspend production - and we don't know how long that would be - is really going to create some chaos for the airlines that are involved in this, as well as the 600 or so companies that are part of the 737 MAX supply chain and Boeing itself."


Southwest Airlines, the biggest operator of 737 MAXs, and American Airlines have already pushed back cancellations of MAX flights through early April.


Investors are also getting hurt. Boeing stock has lost a quarter of its value since March, when 737 MAX planes were grounded worldwide following two crashes that killed 346 people.


Larger, more diversified suppliers like United Technologies or Honeywell may fare better. That's because their revenue is spread across other planes produced by Boeing and Airbus.


But back in Kansas, Spirit AeroSystems has already cut contractors and temporarily reduced the work week for employees in June.

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They look like sausages, but they're fuselages. They sit in storage in Kansas at Boeing's largest supplier of parts for its troubled 737 jet. Sources say its decision to halt its MAX production line could lead to furloughs in Kansas, where this fuselage maker, Spirit AeroSystems, is located. With 17,000 people, Spirit makes roughly 70% of the 737's parts. The company declined comment.

Boeing's assembly line halt could have huge ripple effects on the U.S. economy and employment. The aerospace giant is the largest U.S. exporter. Economists say the output suspension would stop the surge in inventories, thereby cutting first quarter economic growth by at least half a percentage point. And it could push suppliers to layoff or furlough employees or cut their hours.

Atmosphere Research Group president, Henry Harteveldt:

SOUNDBITE: ATMOSPHERE RESEARCH GROUP PRESIDENT, HENRY HARTEVELDT, (ENGLISH) SAYING:

"For Boeing to announce that it could suspend production - and we don't know how long that would be - is really going to create some chaos for the airlines that are involved in this, as well as the 600 or so companies that are part of the 737 MAX supply chain and Boeing itself. It's going to have substantial impact on the U.S. economy."

Southwest Airlines, the biggest operator of 737 MAXs, and American Airlines have already pushed back cancellations of MAX flights through early April.

Investors are also getting hurt. Boeing stock has lost a quarter of its value since March, when 737 MAX planes were grounded worldwide following two crashes that killed 346 people.

Larger, more diversified suppliers like United Technologies or Honeywell may fare better. That's because their revenue is spread across other planes produced by Boeing and Airbus.

But back in Kansas, Spirit AeroSystems has already cut contractors and temporarily reduced the work week for employees in June.