Restructuring Charges (Notes)

6 Months Ended

Jul. 02, 2020

Restructuring and Related Activities Disclosure [Text Block]

23. Restructuring Costs

In March 2019, the B737 MAX fleet was grounded in the U.S. and internationally following the 2018 and 2019 accidents involving two B737 MAX aircraft. At the time, the Company was producing B737 aircraft at a rate of 52 aircraft per month and was expected to increase production to 57 aircraft per month in mid-2019. On April 12, 2019, Boeing and the Company entered into the 2019 MOA relating to the Company's production of aircraft with respect to the B737 program. Under the 2019 MOA, the Company was to maintain its delivery rate of 52 shipsets per month with respect to the B737 program following Boeing’s announced temporary adjustment in the production rate from 52 to 42 aircraft per month. The 2019 MOA established that all excess shipments (B737 shipsets in excess of Boeing’s rate) would be deemed to be delivered to Boeing “FOB” at the Company's facilities, which would trigger Boeing’s payment obligations for the excess shipsets. On December 19, 2019, the Company was directed by Boeing to stop all B737 MAX deliveries to Boeing effective January 1, 2020, due to Boeing’s announced temporary suspension of B737 MAX production. Accordingly, the Company suspended all B737 MAX production beginning on January 1, 2020. On February 6, 2020, Boeing and the Company entered into the 2020 MOA providing for delivery to Boeing of 216 B737 MAX shipsets in 2020, which represented less than half of the Company’s B737 MAX annualized production rate in 2019. As a result, in the first quarter of 2020, the Company took actions to align costs to the expected 2020 production levels (restructuring activity). On May 4, 2020, Boeing and the Company agreed that Spirit would deliver 125 B737 MAX shipsets to Boeing in 2020. On June 22, 2020,

Boeing directed the Company to reduce its 2020 B737 production plan (applicable to MAX and P-8 shipsets) from 125 to 72 shipsets, which includes 37 shipsets to be produced and delivered over the balance of the year and 35 shipsets that have already been delivered to Boeing as of June 19, 2020.

On April 8, 2020, the Company received a supplier letter from Airbus, which reduced production rates across all programs as a result of significant disruption to global travel caused by the COVID-19 pandemic.


•	Single-aisle average production volume of 40 APM


•	A350 average production volume of 6 APM


•	A330 average production volume of 2 APM

During the three months ended July 2, 2020, the COVID-19 pandemic has continued to have a significant negative impact on the aviation industry and further impacted the Company’s global business. In response, during the three months ended July 2, 2020, the Company implemented production suspensions and adjusted production rates, including additional restructuring activity to further align costs. The Company’s planned restructuring activities are documented in a restructuring plan that is approved and controlled by management. These planned activities to align costs to expected production levels materially affected the scope of operations and manner in which business is conducted by the Company.

Restructuring costs under the plan, which are presented separately as a component of operating loss on the consolidated statement of operations, are related to involuntary workforce reductions and the VRP. The total restructuring costs of $48.9 for the six months ended July 2, 2020 includes $36.4 related to involuntary workforce reductions and $12.5 related to VRP.

The total restructuring costs related to involuntary workforce reductions of $36.4 for the six months ended July 2, 2020 includes $31.5, which was the total amount incurred for the involuntary termination benefits of approximately 3,200 employees in the first quarter, plus an additional $4.9 that was added during the three months ended July 2, 2020, representing the total amount expected to be incurred for the involuntary termination benefits of approximately 1,450 additional employees in response to further COVID-19 impacts, as noted above. The $36.4 total represents the full cost of the involuntary workforce restructuring activities included in the plan through July 2, 2020. Of the $36.4 total for the six months ended July 2, 2020, $33.2 was paid during the six-month period ended July 2, 2020 and the remaining $3.2 is recorded in the accrued expenses line item on the balance sheet as of July 2, 2020.

The total restructuring costs related to the VRP of $12.5 for the six months ended July 2, 2020 represents the total costs expected to be incurred for the voluntary retirement packages of 207 employees through April 2, 2020 of $11.1, plus an additional $1.4 for the voluntary retirement packages of an additional 27 employees during the three months ended July 2, 2020. The cost related to packages under the VRP are generally accrued and charged to earnings when the employee accepts the offer. Of the $12.5 total for the six months ended July 2, 2020, $11.1 was paid during the six-month period ended July 2, 2020 and the remaining $1.4 is recorded in the accrued expenses line item on the consolidated balance sheet as of July 2, 2020.

The costs of the restructuring plan are included in segment operating margins. The total amount expected to be incurred for each segment is $32.5 for the Fuselage Systems Segment, $10.4 for the Propulsion Systems Segment, and $6.0 for the Wing Systems Segment.