WASHINGTON • Boeing said on Monday it will temporarily stop producing its grounded B737-Max aircraft starting next month as it struggles to get approval from regulators to put the plane back in the air.
The Chicago-based company said production would halt at its plant with 12,000 employees in Renton, Washington, near Seattle. But it said it did not expect to lay off any workers "at this time".
The move amounts to an acknowledgement that it will take much longer than Boeing expected to win approval from the United States Federal Aviation Administration (FAA) and other global regulators to fly the planes again.
The Max is Boeing's most important jet, but it has been grounded since March after crashes in Indonesia and Ethiopia that killed a total of 346 people. The FAA told the company last week that it had unrealistic expectations for getting the plane back into service. Boeing has missed several estimates of a return date for the plane, and the company did not give a date on Monday.
Even if no employees are laid off, ceasing production will still cut into the nation's economic output because of Boeing's huge footprint in the US manufacturing sector. Through October, the United States aerospace industry's factory output has fallen 17 per cent compared with the same period last year, to US$106.4 billion (S$144 billion), in part due to previous 737 Max production cuts.
The shutdown is also likely to ripple through Boeing's vast network of 900 companies that make engines, bodies and other parts for the 737, and layoffs are likely.
Mr Richard Aboulafia, an aircraft industry analyst at the Teal Group, said the shutdown would probably hinder the economy in the coming months and could worsen the nation's trade balance.
"This is the country's biggest single manufactured export product," Mr Aboulafia said.
In a statement, Boeing said it will determine later when production can resume, based largely on approval from government regulators.
"We believe this decision is least disruptive to maintaining long-term production system and supply chain health," the statement said.
Boeing said some of the Renton workers could be reassigned to 737 or other programmes elsewhere in the Seattle area. Some could also help to prepare the 400 Max planes Boeing has built and stored so they are ready whenever approval comes to return to the skies.
Investigators have found that flight control software designed to stop an aerodynamic stall was a major factor in the crashes, and Boeing is updating the software, making it less aggressive. But regulators have yet to approve the changes.
The FAA said on Monday that it would not comment on Boeing's business decisions, and it has no set timeframe for when work to re-certify the Max to fly will be completed.
Boeing has made progress on some FAA requirements to get the Max back in service, said Mr Jeff Windau, an analyst for Edward Jones.
Boeing will likely face some tough negotiations with suppliers about what level of payments it will provide during the production hiatus. The company will want to avoid any layoffs or shutdowns by suppliers that will keep it from quickly restarting production once its safety is approved.
"It is really in Boeing's interest to identify who needs payments to keep workers and capabilities in place for when the ramp-up eventually happens," Mr Aboulafia said.
The production halt means that it will take longer than expected to get FAA approval, he said. "If they had got some information quietly, behind the scenes, from the FAA that things were looking good for January or February, they wouldn't have done this," he added.
Even before the production halt, airlines were delaying the dates for when they expect the Max to fly passengers. Last week, American Airlines removed the Max from its schedule until April 7, a month later than previously announced. Southwest Airlines' pilots union also does not expect the Max to fly until April at the earliest.
All six of SilkAir's 737 Max aircraft are sitting in storage in Australia awaiting the go-ahead to fly again.
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