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A Boeing 737 Max airplane being built for Norwegian Air International taxis for a test flight on Dec. 11 at Renton Municipal Airport in Renton, Wash. Ted S. Warren/Associated Press

Chicago-based aerospace manufacturer Boeing will halt production of its new 737 Max commercial jetliner in January, Boeing announced Monday.

There are no layoffs associated with the production cut, a person familiar with the decision said.

The production cut caps off a financially disastrous year for Boeing’s commercial airplanes division. The 737 Max, Boeing’s newest commercial jet, was grounded worldwide in March after a software problem played a role in two deadly crashes in Indonesia and Ethiopia. The company has been waiting for the Federal Aviation Administration to approve a software fix, but the approval timeline has been repeatedly pushed back.

“We believe this decision is least disruptive to maintaining long-term production system and supply chain health,” the company’s statement reads.

“This decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft. We will continue to assess our progress towards return to service milestones and make determinations about resuming production and deliveries accordingly.”

The company’s announcement did not say how long the production halt would last. Although no furloughs of Boeing’s workers were announced, hundreds of companies supply parts for the Max and would be affected by the decision.

Some White House officials had hoped that there would be a bump in economic growth if Boeing was able to quickly solve its problems. Boeing’s stock dropped $14.67 to $327 by the end of trading Monday, following reports that the company was expected to suspend production of the Max. Shares of Boeing Co. stock are down 10% over the past three months.

Commerce Secretary Wilbur Ross in August told CNBC that “problems” with the 737 Max had been big enough to shave 0.4% off the entire U.S. gross domestic product for a period this year. He said he expected an uptick when the problems were fixed, but it’s unclear what the impact might be if production is completely halted.

The Boeing planes have been grounded worldwide since the March 10 crash of an Ethiopian Airlines flight. It was the second crash involving a 737 Max in less than five months. In all, 346 people died in the tragedies.

Last week, a former senior manager at Boeing said he repeatedly warned company executives about production issues at the Renton, Washington, factory where the jets were being built, but his recommendations to shut down production were rebuffed.

“The factory did not have enough skilled employees, specifically mechanics, electricians and technicians to keep up with the backlog of work,” said Edward Pierson, in remarks prepared for a hearing Wednesday before the House Transportation Committee. “I witnessed numerous instances where manufacturing employees failed to communicate effectively between shifts, often leaving crews to wonder what work was properly completed.”

In October, a group of international and American aviation safety experts identified broad failures in the design and oversight of the jet’s production, including that government regulators had “inadequate awareness” of an automated system that contributed to two deadly crashes. The report by the Joint Authorities Technical Review panel said communication breakdowns, bureaucracy and staffing disparities meant that key government safety personnel did not know enough about the power of the automated feature until after tragedy struck.

Both Boeing and the FAA had deemed the now-grounded planes safe as part of a years-long certification process.


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