United Technologies (UTC) forecasts that Boeing will suspend production of the 737 Max for around 90 days, then start building the narrowbody again at a rate of 21 aircraft per month.
Speaking on a full-year earnings call on 28 January, chief executive Greg Hayes said that the “90-day production delay” was “consistent with the direction we have received from Boeing”, with whom it has been in “constant contact”. The airframer stopped building the 737 Max earlier this month amid the ongoing grounding crisis.
UTC’s Collins Aerospace unit supplies several systems onto the 737 Max, including avionics and brakes, and Hayes forecasts that the three-month suspension will cost the business around $300 million in lost revenue and $150 million in operating profit. Lost revenue for the full year will be around $600 million, he says.
Once production resumes it will be “cut in half” from the 42-per-month rate seen prior to the suspension, says Hayes.
Hayes says that UTC is forecasting a $400 million cash impact at Collins Aerospace for the full year, which includes some money – less than $100 million – to keep its supply chain healthy.
“Any time you have these kind of production disruptions you always worry about the supply chain and some of the smaller suppliers out there,” he says. “We are trying to manage that proactively so we don’t have a problem when we start the line back up with suppliers who can’t meet demand.”
But despite the suspension and lower rate once Max production resumes, Collins Aerospace does not presently see a requirement to lay off staff, says Hayes.
Meanwhile, UTC expects the closure of its merger with Raytheon early in the second quarter. This will see a new aerospace and defence business formed called Raytheon Technologies, with UTC also divesting its Carrier refrigeration and Otis elevators units.
While 2020 is the “last chapter of United Technologies as it stands”, Hayes is positive about a “bright future” for Raytheon Technologies, which will also include engine maker Pratt & Whitney.