U.S. Boeing suspended production of the 737 MAX series from January, potentially pulling down U.S. gross domestic product by at least 0.5 percentage points in the first quarter of next year, economic analysts said Wednesday. Some analysts believe that the global aviation manufacturing giant for the first time in more than 20 years decided to suspend production, meaning that the crisis caused by the crash is still worsening, will have a chain impact on the global supply chain and the U.S. economy.
The inventory has reached about 400
Expect to wait longer for the re-flying.
Boeing said in a statement on the 16th that it would suspend production of the 737 MAX series from January. But the statement did not say how long the suspension would last.
Jeff Wendow, an industry analyst at Edward Jones Investments in the United States, said addressing inventory and maintaining delivery efficiency could be a major factor in Boeing’s decision to suspend production.
The 737MAX, Boeing’s best-selling model, has previously produced 52 aircraft a month and has delivered more than 370 aircraft worldwide, with production falling to 42 in April and currently in stock.
Boeing had intended to return to flight seventy-seven7MAX by 2020, but the FAA has so far refused to issue airworthiness certification, citing safety concerns.
Federal Aviation Administration Director Stephen Dixon told U.S. media on the 11th, Boeing 737 MAX aircraft this year can not get re-entry approval, and there is no clear timetable.
You’re going to burn $1 billion a month.
But it’s not just Boeing that stops production.
Boeing’s decision to suspend production could have a series of ripple effects.
First, Boeing’s short-term financial pressures will continue to rise.
According to an analysis by JPMorgan, continued production but undeliverable straining Boeing’s cash flow is currently “burning” $2 billion a month for it, and will still cost as much as $1 billion a month after the shutdown.
Boeing’s quarterly profit plunged 53 per cent in the third quarter, and continued “burning money” caused net cash flow to plunge to negative $2.9bn from $4.1bn a year earlier.
Second, the shutdown could hit global suppliers along Boeing’s vast and complex supply chain.
Boeing has more than 600 suppliers on the 737MAX project, Reuters reported.
For example, Kansas-based Aviation Systems, inc., is the largest supplier of parts to the 737 project, and half of its revenue comes from the 135,000-employee company. Next, production may need to be adjusted as a result of Boeing’s shutdown.
For example, the joint venture between General Electric of the United States and Saifeng Group of France, a supplier of 737 MAX engines, may also face production cuts. Ge’s quarterly cash flow fell by $400 million after Boeing reduced production to 42, the Wall Street Journal reported.
Third, Boeing’s shutdown could hit the U.S. economy in the first quarter of next year.
As the largest U.S. exporter of goods, Boeing is vital to the U.S. economy.
The 737MAX shutdown has had a small impact on the U.S. economy as higher inventories offset a drop in exports, but the shutdown means inventories are no longer rising and exports are still unrecoverable, which will have a direct impact on U.S. GDP in the first quarter of next year.
The conundrum of “too big to fail”
The manufacturing giant has been happy to play the role of global supply chain integrator. Boeing currently produces more than 60 percent of the components of its aircraft, ranging from seats to engines, and sourcing and assembling more than 1 billion parts each year from thousands of suppliers worldwide.
However, the huge supply chain network and the scale of operations also bring “too big to fail” demand. Industrial behemoths like Boeing need to face up to the “systemic importance” and how to deal with potential knock-on shocks is a global challenge.
On October 29, 2018, a Boeing 737-8 aircraft belonging to the 737MAX crashed into the sea, killing all 189 people on board.
On March 10, 2019, an Ethiopian Airlines Boeing 737-8 crashed, killing all 157 people on board.
The investigation found that both crashes may have been related to the erroneous activation of the airliner’s automatic stalling system.
Since then, the 737MAX series has been grounded or banned in many countries and regions around the world.