‘Given customer pressures, we are implementing additional cost containment measures and workforce actions.’
Spirit AeroSystems Chief Financial Officer Irene Esteves
This is what Irene Esteves, Chief Financial Officer of Spirit AeroSystems Holdings Inc. SPR -1.49%, said at the beginning of a message to workers on Friday.
The customer is Boeing Co. BA -0.20%, and the pressures come from the strike that started on September 13 by Boeing workers, who are part of the International Association of Machinists and Aerospace Workers.
Spirit, which is being bought by Boeing, said on October 28 that about 700 workers who work on the Boeing 767 and 777 aircraft programs will be on leave for 21 days.
Spirit said it has built up a “significant inventory buffer” because of problems with production that have slowed down orders. This means it doesn’t have room to store any more planes.
Esteves said, “At this point, all other programs will continue to run as usual.” “However, if the labour dispute between our customer and the International Association of Machinists lasts past Thanksgiving, the workers may have to take more actions, such as being furloughed or laid off.”
Since the strike began, shares of Spirit have dropped 5% and shares of Boeing have dropped 5.1%.
Boeing buys the most from Spirit. Spirit’s second-quarter sales of $862.3 million, or 57.8%, came from Boeing.
Along with the furloughs, Esteves told his workers that other steps were being taken “effective immediately” to lessen the effects of the strike:
- A hiring freeze, including no backfills.
- Elimination of overtime.
- A reduction of 15% in nonlabor spending.
- Elimination of travel.
- Elimination of all advertising and marketing expenditures, including air shows, trade shows and special events.
- Elimination of consultant spending.
- Reduction of working capital through strict inventory management.
- Scaling back of capital expenditures.
Esteves said more information will be shared when Spirit reports third-quarter results, which are expected around the end of October, and again in mid-November if the strike continues.
