Aircraft parts output is being grounded by worker shortages
Canada’s Mitchell Aerospace has a booming business – and a shop-floor shortfall that is reverberating from Boeing (BA.N) to Airbus (AIR.PA).
The Montreal-based supplier of aircraft parts has an order backlog from clients such as Raytheon Technologies (RTX.N), as aircraft makers push to ramp up output after a two-year slump.
Like other companies that supply precision cast parts for everything from landing gear to engine components, Mitchell Aerospace is facing a labor shortage expected to hobble plane production through 2023.
“It’s just a hurricane in the plant,” said company President Guillermo Alonso. “There’s just no time. It’s just produce, produce, produce and find ways to improve your productivity.”
A slowing global economy has started to unwind some supply chain shortages that hit manufacturers and contributed to inflation. Demand for shipping and airfreight have softened, chip sales are slowing and used car prices in the United States are falling.
But aircraft parts makers are still reeling from deep job cuts undertaken when planes were grounded during the pandemic, a sign of how uneven the supply chain crisis remains.
In the United States, aerospace employment is 8.4% below its pre-pandemic level. In the province of Quebec, where Mitchell is located, the industry needs to fill 38,000 jobs in the next decade, according to industry trade group Aero Montreal.
Major casting makers like Berkshire Hathaway Inc’s (BRKa.N) Precision Castparts Corp and Pittsburgh-based Howmet Aerospace (HWM.N), which supply Boeing, Airbus and General Electric (GE.N), are hiring after slashing staffing in 2020.
But it takes time to train new hires. Boeing Chief Executive David Calhoun warned that labor will remain a bottleneck for the industry for years.
“I don’t see this getting resolved any time soon,” Calhoun told a U.S. Chamber of Commerce conference this month.
The problem is most acute in the highly labor intensive, hard to automate castings industry. In a recent Jefferies survey, nearly three-fourths of aerospace equipment makers cited castings as the largest source of shortages.
Privately-held Mitchell Aerospace is encouraging staff to take overtime, raising wages by 4.75%, and offering workers referral bonuses. It is also trying to hire more women, immigrants and refugees from Ukraine.
Some casting suppliers are taking as much as 72 weeks to fill in orders, said David Wireman, a managing director at AlixPartners.
Rising interest rates and mounting economic uncertainty are making companies wary about ramping up capacity, given concerns that demand could collapse, he said. “It is going to be a rocky time for quite a while.”
‘IT’S ALL LABOR’
Meanwhile, the struggle to find workers is rippling through the supply chain, delaying jet engine and aircraft production at a time when much of the air travel market is booming.
Leesta Industries, a Mitchell customer, is also wrestling with delays and quality problems from a different castings producer.
When that producer delivers a month late, Montreal-based Leesta, which makes engine and landing gear components, must adjust to meet its own deadlines, said President Ernie Staub.
“Your actual lead time of your product has been hurt by a month. You have to be ahead on the rest of your work,” he said.
Raytheon recently said tight supplies of castings has left it operating “hand-to-mouth,” warning that delivery of some Pratt & Whitney large commercial engines might slip into the first quarter of 2023. The company did not specify the previous timeline for the deliveries.
Rival GE said supply shortages have made it harder to deliver engines on time.
Their customers are feeling the pinch. Airbus’ production target has declined, while Boeing warned supply chain pressures have capped its ability to ramp up output.
Mitchell’s Montreal factory starts humming before sunrise with workers in protective gear filling mold sections with a mix of fine sand and a bonding agent. The whirring and grinding stops by mid-afternoon with no workers for a second shift.
“It’s all labor,” said Alonso, who is looking for shop workers and metallurgists. “We have the demand.”
Mitchell can only pass on about half of its higher costs to customers. Automating a part of Mitchell’s sand casting production by next year could address some labor issues, higher costs and allow for growth, Alonso said.
He sees robots replacing a job in which a worker must remove debris from castings. The work is repetitive and the part is at risk of damage in the process.
“We haven’t pulled the trigger on the investment yet,” Alonso said, “but it’s a necessity.”