Boeing says it could suspend 737 Max production if grounding continues, putting tens of thousands of jobs at risk

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Boeing says it could suspend 737 Max production if grounding continues, putting tens of thousands of jobs at risk

Boeing 737 Max 2

REUTERS/Lindsey Wasson/File Photo

FILE PHOTO: Employees walk by the end of a 737 Max aircraft at the Boeing factory in Renton, Washington, U.S., March 27, 2019.

  • Boeing will consider reducing or suspending production of its 737 Max aircraft if the aircraft remains grounded for much longer than Boeing's current projected timeline.
  • The planemaker expects to submit fixes to the FAA by early September, and for the plane to resume service in the early part of the fourth quarter. However, CEO Dennis Muilenburg warned that unexpected delays are possible.
  • Boeing's Renton, Washington, factory site, which produces the plane, employs more than 12,000 people. It was not immediately clear what would happen should production be suspended.
  • Visit Business Insider's homepage for more stories.

Boeing will consider slowing down or even halting production of its 737 Max plane if the fleet's worldwide grounding continues for longer than expected, CEO Dennis Muilenburg said during Boeing's second quarter earnings call on Wednesday.

Boeing currently expects the Max to return to the skies early in the fourth quarter, Muilenburg said, as the planemaker continues to test software changes to solve various issues with the plane. It expects to submit the changes and other documentation to the FAA in a final package by early September, according to Muilenburg.

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However, Muilenburg warned that there was still a possibility for unexpected delays or issues, and it's possible that regulatory agencies take longer than expected to approve the new package.

Boeing previously cut production of the planes by nearly 20% following the grounding to 42 a month as airlines worldwide grounded their fleets and were unable to accept new deliveries. Further cuts are possible, including a temporary production shutdown, although Muilenburg also said that if the planned regulatory approval timeline holds, Boeing could ramp up production to as high as 57 planes a month in 2020.

Read more: Boeing announced a major leadership shuffle for its troubled 737 Max team, and the head of the program is out

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"If our estimate of the anticipated return to service changes, we might need to consider possible further rate reductions or other options including a temporary shutdown of the Max production," he said on the call.

Boeing's Renton, Washington, factories, which primarily produce the 737 Max, employ 12,000 workers, according to Boeing's website, although it was not immediately clear how many of them would be affected, nor whether there would be layoffs or gaps in employment in that scenario. Boeing did not immediately return a request for comment.

Companies that supply components for the 737 Max would likely also be affected, potentially impacting a much larger number of employees.

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The 737 Max has been grounded since March, following two fatal crashes of the new-model aircraft in about five months.

Preliminary reports into the two crashes - Lion Air Flight 610 and Ethiopian Airlines Flight 302 - indicate that an automated system erroneously engaged and forced the planes' noses to point down. Pilots were unable to regain control of the aircraft.

The automated system, the Maneuvering Characteristics Augmentation System (MCAS), was designed to compensate for the fact that the 737 Max has larger engines than previous 737 generations. The larger engines could cause the plane's nose to tip upward, leading to a stall - in that situation, MCAS could automatically point the nose downward to negate the effect of the engine size.

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Boeing has been accused of rushing the plane's design and cutting corners in order to bring it to market more quickly in an effort to remain competitive as its rival Airbus unveiled the latest generation of its A321 aircraft. The Federal Aviation Administration has also come under scrutiny for certifying the plane without adequate oversight.

Get the latest Boeing stock price here.

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