What the Machinists Strike Means for Spirit AeroSystems’ Finances, 737 Max Deliveries

Aug. 2—Spirit AeroSystems posted a net loss of $206.3 million in the second quarter, which included the bulk of a two-week work stoppage as striking Machinists re-negotiated their contract.

The Wichita-based aerostructures giant failed to meet Wall Street expectations as stock prices fell by $1.96 per share in the quarter — $1.46 when adjusted for pretax expenses. Spirit stock was down by nearly 25% at 12:25 p.m.

"We are very pleased to have in place a four-year contract with our IAM-represented employees, which reflects the gratitude we have for their contributions," CEO Tom Gentile said in a Wednesday earnings press release.

"While the first vote resulted in a work stoppage, we quickly went back to the table with our union partners and reached a resolution. However, the strike did impact our production and deliveries, as reflected in earnings and cash flow."

The company reported $28.3 million in costs related to the new labor deal and $7.3 million in strike disruption charges. The new labor agreement, which covers 55% of Spirit's U.S. workforce, will add $80 million in annual costs, the release states.

The manufacturer announced it is lowering its target for Boeing 737 MAX deliveries this year to 370-390 shipsets, down from the previous target of 390-420. The company still delivered 74 of the 737 shipsets between April and June, up from 71 in the same period last year.

The company also said it has completed repair work on the 737 vertical fin attach fittings defect discovered in March for all available units in Wichita and estimates that Boeing is roughly halfway done with repair work on already-delivered units.

Spirit set aside $23 million in the second quarter in anticipation of a potential Boeing claim for repair work costs to date. An eventual payout may cost more than that.

"This estimate represents what Spirit believes to be the low end of the range of potential liability and the Company cannot reasonably estimate the total potential claim it may receive from Boeing to complete the required repairs," the release states.

Despite modest 5% year-over-year growth in the commercial sector ($1.1 billion), defense and space sector revenue increased by a sizable 30% from 2022 to $189.6 million. Aftermarket revenue swelled by 15% to $92.1 million.

This story was originally published August 2, 2023, 12:30 PM.

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