By MATT MYERHOFF
These are anxious days for Jim Eaton, president of Airdrome Holdings LLC, a supplier of high-pressure tube fittings for Boeing Co. commercial jets.
About 15% of the Long Beach company’s $13 million in annual revenue is derived from Boeing. With 18,000 of Boeing’s machinists on strike since Sept. 2, Eaton said he’s not sure how long the aircraft maker will ask him to continue supplying products.
“I fully expect that if the strike lingers on, we’ll have to stop shipping,” said Eaton, who employs about 80 workers. “Boeing is a company that pays close attention to our financial strength, so it’s a double-edged sword. Something like this could make us look weak in their eyes.”
Eaton is not alone in his concerns. He’s among scores of manufacturers across the Southland that supply components to Boeing. All could lose a major source of revenue should production of the 737, 777 and other jets remain on hold.
Boeing is the largest customer of Cleveland-based Parker Hannifin Corp.’s aerospace business based in Irvine. The strike hasn’t slowed orders so far, said Cheryl Flohr, a spokeswoman for Parker Aerospace.
Still, the company, which has 1,800 local workers, is keeping an eye on the progress of the strike, according to Flohr.
She declined to speculate on when the strike might affect work from Boeing.
The last machinists’ strike at Boeing in 1995 lasted 69 days.
This one is expected to last at least a month because the company and the International Association of Machinists and Aerospace Workers are so far apart on a three-year contract, according to industry analysts.
Workers at Boeing plants in Seattle, Wichita, Kan., and Gresham, Ore., walked off after failing to agree with Boeing on terms for a three-year pact.
The two sides are about $1 billion apart in wages and pension and health benefits.
The strike doesn’t impact Boeing’s operations in OC, which focus on defense contracts, satellites and other areas. The company employs 12,200 people in Anaheim, Irvine, Huntington Beach and Seal Beach. Others from OC work at the company’s Long Beach operations.
While commercial jet production has ceased, Chicago-based Boeing has told most of its suppliers to continue production and delivery. Boeing wants to ensure that it has enough supplies on hand to ramp up its own production and catch up with orders when the strike is over.
That’s the case at Alcoa Inc.’s fastening systems operations, which employ nearly 1,000 people in Fullerton, spokeswoman Anne Brown said. The company provides fasteners,nuts, bolts and other items,for Boeing’s 787 Dreamliner, among other aircraft.
“They have a very full backlog of orders for aircraft,” Brown said. “Boeing is telling us to manufacture and deliver to them as per normal procedures, and to continue to ramp up as rapidly as possible to meet their growth requirements.”
Blocking Delivery
At any time, Boeing could order its suppliers to continue production but stop delivery, which would mean subcontractors would have to lay out money for raw materials and labor but not get paid until deliveries resume.
That already has occurred to some suppliers elsewhere in the country, according to the Aerospace Industry Association.
“There will be different effects for different suppliers,” Boeing spokesman Chaz Bickers said. “Some items might have a longer lead time, some items might be delayed.”
For now, the effects are expected to be muted. The suppliers that survived in the devastated commercial airline industry after the 2001 terrorist attacks are not dependent on one large customer.
“Many suppliers went out of business, particularly the ones that were dependent on companies like Boeing,” said Bill Lewandowski, vice president of supplier management for the aerospace association. “Those that survived, have in large part because they diversified.”
Many suppliers had Boeing as their sole customer during the last machinists’ strike a decade ago.
Boeing also has political reasons to continue accepting deliveries, according to Richard Aboulafia, an aerospace analyst at Fairfax, Va.-based research firm Teal Group Inc.
“When other workforces are idled, it looks bad,” Aboulafia said. “Boeing is confident for a settlement, so they don’t want to have their supplies of components cut off, and have their production disrupted. They’re betting on a short strike, even though it seems like it might be a longer one.”
Boeing has benefited from increased commercial jet orders primarily from regional airlines serving the booming Asian countries. Last week, Boeing said it expects China to need more than 2,600 new planes worth $213 billion in the next 20 years.
The company is in a heated battle with French Rival Airbus SAS for orders in China and elsewhere. For the first half of 2005, Boeing had orders for 417 large jets. Airbus had 276. The competition has given the union leverage in the strike.
“They’ve never been stronger. It’s the opposite of the last strike, when the market was soft,” Aboulafia said.
The strike also may give Boeing suppliers the chance to catch up on work that has been backlogged because of the recent surge in orders for commercial jets.
Consider Ely Co., a Torrance manufacturer that employs 33 people making housings for gear boxes for Boeing contractors Moog Inc. and Honeywell International Inc. Up to 70% of Ely’s current workload is tied to the contractors.
‘Plenty of Work’
The strike “would probably help us catch up on backlogged orders,” said Walther Senff, Ely’s president. “We have plenty of work to do now.”
Senff estimated that Moog and Honeywell can absorb inventory for about four weeks, based on his order and delivery cycle. After that, Senff expects even he will be told to stop delivering.
Myerhoff is a staff writer with the Los Angeles Business Journal. Brian Womack contributed to this story.
