Spirit AeroSystems announced layoffs of about 450 staff late last week. The timing of these cutbacks, in the course of a Boeing acquisition that is being finalized and amid serious quality problems that resulted in the events of January 5th, is questionable.
Given quality problems and a concerted effort to fix them, one would think that an “all hands on deck” situation would apply. The layoff sends the message that financial performance supersedes quality, precisely the wrong message that Spirit and Boeing must send to regulators, investors, customers, and the flying public. Somebody at Spirit is tone-deaf, and that has to fall upon Pat Shanahan, the current CEO.
Given that Shanahan is also being mentioned as a potential candidate for the Boeing CEO position, as he came to Spirit recently from Boeing to execute a turnaround, he should know better than to appear married to the financially-driven culture that has brought once-proud Boeing to its knees. This reflects poorly on the company and its turnaround planning. A better leader would be full steam ahead in solving quality problems at this point and not let anything else get in the way. While Boeing and Spirit are making significant changes in their processes and inspections, that job remains incomplete. Laying off staff before that is finished reflects poor judgment and indicates that the status quo is ok, which it isn’t.
That would have been different if the layoffs had been explained as individuals who violated manufacturing and inspection protocols. However, these layoffs have been positioned as a financial decision rather than a quality one. Admittedly, Spirit AeroSystem’s financial performance has been in the tank, with massive first-quarter losses and a bailout required from Boeing. However, a quality turnaround situation is typically in which staff cuts are not made. The existing quality system at Spirit was inadequate, resulting in massive rework by Boeing in Renton on 737 fuselages.
That rework to correct fuselage problems was costing Boeing as many labor hours as building an entire new airplane in many cases, given the high number of defects on Spirit fuselages. The new process of Boeing inspecting fuselages in Wichita before having them shipped to Renton is a major change that will impact the quality process. But cutting staff in Wichita during major change has an inappropriate appearance. This announcement opens the door to critics of Spirit, critics of the Boeing culture that Pat Shanahan knows so well, and critics of the Jack Welch school of managing for shareholder value that has eroded Boeing’s historic excellence since the McDonnell-Douglas merger.
The Bottom Line:
If Pat Shanahan wanted to eliminate himself from consideration for the Boeing job, the myopic move he and Spirit Aerosystems management just made may be the factor that ensures that any consideration is short-lived. A CEO needs to manage more than the bottom line. What Boeing needs in a new CEO is someone who understands the value of transparency and can read the optics of this type of move, particularly for customers who continue to wait for aircraft. Cutting staff when planes are late doesn’t build confidence; it destroys it.
