Boeing 737 Max Pain Deepens: Plane Maker Reassigns Workers, Spirit Aero Considering Layoffs

Boeing (NYSE: BA) fired its CEO recently and halted the production of its 737 Max planes but the pain from the plane's grounding last March is just about beginning to hit workers, both at the company and its suppliers. The Seattle-based company will now reassign about 3,000 workers who produced the planes, it told employees Monday, CNBC reported.

And as the impact of the production halt begins to ripple down along Boeing's supply chain, Wichita, Kansas-based Spirit Aerosystems said it is considering layoffs, among other measures, to cut costs.

The decisions, although long expected, have hit employees as they returned to work following an extended holiday break. Boeing is one of America's largest manufacturers and No.1 exporter, and the production halt was already expected to weigh on U.S. GDP growth in 2020. But the new layoffs and job losses will aggravate the impact on the U.S. at a time the global economy is staring at a slowdown.

The 737 Max, once Boeing's best-selling plane, is now grounded across the world following two crashes that together killed 346 people. The crashes have been blamed on a flawed piece of software and other design problems as Boeing rushed to bring the plane to market. The FAA has been accused of handing over to Boeing key parts of the plane's certification and being slow to ground the plane after the second crash.

Since then more problems with the plane's systems have been revealed, along with Boeing's reported attempts to keep from the FAA concerns raised internally about the plane's safety during the certification process. It is not clear when regulators will clear the plane to fly again.

The production halt is expected to go into effect from the middle of this month, and Boeing said some workers will be moved to work on the 767 or 777X lines; others will be sent to the company's storage facilities in Moses Lake, Wash. and a new site in Victorville, Calif., CNBC reported.

Boeing told employees once a decision is made on restarting the 737 Max production, the reassigned employees "will start returning to their regular assignments in a phased approach.”

Also on Monday, Spirit Aerosystems CEO Tom Gentile detailed in a letter to employees a voluntary layoff plan for employees in Wichita, Tulsa, and McAlester, KWCH reported. Spirit makes fuselages for the 737 Max.

Many of these employees, with years of experience in their specialized jobs, will find it difficult to get new jobs that require similar skill levels and pay as much, analysts had pointed out earlier. And when the impact of the production halt cascades down further through Boeing's supply chains, even more workers will be impacted -- especially in the small engineering shops that make specialized parts. Those shops are already under financial pressure from bearing the cost of the metals and materials they have bought and with the need to find storage space for them.

Worse, when the production resumes, Boeing will need to find and train new employees to spin up the assembly lines to full speed as the employees who depart may find new jobs and move on.