PARIS, June 22 (Reuters) – Spirit AeroSystems (SPR.N) will suspend factory production at its Wichita, Kansas plant on Thursday, the company said, after workers rejected a proposed four-year deal and announced a strike to begin in June . 24.
Spirit is one of the largest suppliers of aerospace heavyweights to Boeing (BA.N) and Airbus (AIR.PA), with its Wichita site making the entire fuselage of Boeing’s best-selling 737 MAX narrowbody jet and the front section of most of its other aircraft, as well as pylons for the Airbus A220.
Shares of Spirit fell about 9% in premarket trading, while Boeing’s fell 3.3%. Paris-listed shares of Airbus lost 1.4% in regular trading.
A prolonged work stoppage at Spirit could have ripple effects for the aircraft manufacturers it supplies, ultimately forcing them to slow or halt jet aircraft assembly at a time when both Airbus and Boeing are ramping up production.
“It’s not a welcome development,” said Richard Aboulafia, an aerospace analyst at AeroDynamic Advisories.
“I think the general feeling is that (Spirit) had it under control with what seemed to be a reasonable agreement,” he said. But after more than a decade of cost pressure on the aerospace industry, “labours feel like they have some power.”
Spirit will suspend factory production before the expiration of its contract with the International Association of Machinists and Aerospace Workers (IAM) on June 24, but will continue to pay its workers, it said.
“Despite this setback, we are not distracted from the task ahead. We look forward to further meetings with IAM leaders,” said Spirit.
Although IAM and Spirit reached a preliminary contract agreement last week, the workers voted to reject and strike the deal.
“IAM’s dedicated and hard-working membership at Spirit AeroSystems has worked without fail during tumultuous times, including a pandemic that brought everything to a standstill. Most of our members have concluded that the company’s offer is unacceptable,” IAM said in a statement. .
In an emailed statement, IAM said 79% of workers voted to reject the contract and 85% voted to strike. About 55% of Spirit’s US employees were covered by the agreement, which expires this month.
Spirit had 12,735 workers at its six U.S. facilities, with 11,000 in Wichita.
The union said it would regroup and begin planning “next steps to bring the company back to the table”.
Boeing said it continued to monitor the situation and support Spirit. The aircraft maker has been working to increase the output of its 737 MAX jets to 38 per month from the current level of 31, and 787 jets to five per month from the current level of four this year.
“(The impending strike) threatens Boeing’s pace of production for these programs,” JPMorgan analyst Seth Seifman said in a note.
While not commenting on the work stoppage itself, Airbus said it has conducted regular assessments with suppliers to mitigate potential risks to production.
The strike is yet another setback for Spirit, which is grappling with a recent 737 fuselage quality issue and under pressure with cash flow.
In May, Boeing CEO Dave Calhoun said it would be difficult to make contingency plans for an attack on Spirit.
“Even if they were to try to move forward on their current production, that will be measured in weeks and not months, so we support them in every way we can to come up with a constructive response,” he said.
Reporting by Valerie Insinna, Abinaya Vijayaraghavan, Shivansh Tiwary and Abhijith Ganapavaram; Edited by Jason Neely, Mark Potter and Pooja Desai