April 16, 2012 / 12:20 PM / 6 years ago

Cushion helps absorb shocks after tornado-Boeing

(Reuters) - Boeing Co on Monday said its production system has a cushion in place that will help absorb disruptions caused by a weekend tornado that hit Spirit AeroSystems, the supplier that makes its 737 fuselage and parts of other planes.

Wichita-based Spirit shut down temporarily after a tornado damaged roofs and knocked out power on Saturday night. The company said it did not yet know what the full impact would be on production, but operations would be suspended at least through Tuesday and near-term deliveries would be affected.

Spirit, Boeing’s biggest supplier of structural components, makes 35 fuselages each month for the Boeing 737, the company’s best-selling airplane, which is assembled in Renton, Washington. Boeing, which is increasing the production rate of the 737 and other planes, declined to say whether the disruption would slow deliveries of the plane to its customers.

“Boeing typically has a cushion in its production system to account for potential disruptions,” Boeing spokesman Larry Wilson said, adding that Boeing would know more over the “next several days.”

“We’re working closely with Spirit on that to try and understand any potential impacts,” Wilson said.

Boeing has 2,679 unfilled orders for 737s on its books, according to its website.

A spokesman for Spirit said operations would restart when it is safe for employees to enter the plants. The company’s Wichita operations are spread across 45 buildings, he said.

“The majority of what we’re dealing with is infrastructure impact, not production capability impact,” said spokesman Ken Evans. “We believe that our essential ability, once we make the site safe to start production again, we’re going to be able to start production fairly quickly.”

Evans said Boeing is Spirit’s largest customer and that 85 percent of its work is for the plane-maker. He said work on the 737 draws about 50 percent of Spirit’s revenue.

“We make a portion of every Boeing commercial aircraft in production,” Evans said.

The company also makes the forward fuselage, including cockpit and cabin, for the Boeing 787 Dreamliner, Boeing’s new high-profile, carbon-composite aircraft that came to market last year after three years of delays.

Boeing, the world’s second-largest commercial plane-maker after EADS unit Airbus, made first delivery of a Dreamliner last year and is ramping up the production rate to 10 planes per month by the end of 2013, a target many experts believe to be unattainable.

Spirit, which was formerly a unit of Boeing before it was sold in 2005, also makes part of the upcoming Airbus A350 and A320.

One industry expert said the damage at Spirit could hit Boeing deliveries in the second quarter. Plane-makers typically are paid for their planes at delivery.

“Based on what I’ve seen it looks like it could lead to some sort of disruption,” said Wedbush Securities analyst Kenneth Herbert. “But it looks like the tooling is relatively intact at Spirit, so I‘m not expecting any long-term disruption.”

Herbert said the 737 is more vulnerable than other Boeing programs to problems affecting Spirit because of the high production rate for that plane. Boeing now produces 35 737s per month and aims to boost production to 42 to per month.

The 737 is the domestic workhorse for many airlines across the globe. It competes with the Airbus A320. Boeing and Airbus intend to update those planes with new fuel-efficient engines.

Boeing will call its upgraded 737 the MAX. The upgraded airbus narrow-body will be known as the neo. Herbert said the weekend disaster would likely have no impact on those upgrades

Shares of Boeing were down 37 cents at $72.55 on the New York Stock Exchange at midday.

Reporting By Kyle Peterson in Chicago, Sagarika Jaisinghani in Bangalore and Karen Jacobs in Atlanta; Editing by Maureen Bavdek

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