FARNBOROUGH, England — Aerospace suppliers in Washington state have suffered through an unprecedented downturn due to the double impact of the pandemic and Boeing’s very low production rates.
Some have gone out of business. Some have downsized.
Those that survived have had to transform — including Sekisui Aerospace, which manufactures composite cabin interior parts such as galleys and crew rests in Renton and ducting for cabin air conditioning systems in Sumner.
In an interview at the Washington state stand at the Farnborough Air Show in England, CEO Daniele Cagnatel described a dramatic shrinking and rebirth.
The company had about 1,500 employees in 2019, with 1,200 of those jobs in Washington, including a plant in Auburn. Today it has 550 employees, with about 400 in Washington. The Auburn plant is closed.
“COVID did what it did. Coming out of COVID, the other issue we had was the 787 production halt,” Cagnatel said. “Half our contracts were on the 787.”
“2020 was bad, 2021 was worse and 2022 is the worst from the perspective of production volume,” he said.
Yet Cagnatel said Sekisui is primed for growth again in newly modernized plants. Japanese conglomerate owner Sekisui provided him the funding to retool and invest for a more diversified future. WA
“We worked hard in 2020-21 to prepare and change,” he said.
Prepping for a better future
Cagnatel upgraded the technology in the plants, acquired tooling from competitors who shut down, and installed new information flow systems.
In Renton, new robotic cells automate the manufacture of thermoplastic parts from carbon fiber composites.
Cagnatel also won new business, making composite parts for startups building drones or electric vertical takeoff and landing aircraft (eVTOL) and for sectors outside aerospace in medical and automotive supplies.
“We have nine major new product introductions starting that will turn into revenue in 2023, ’24,” he said. “Those will be 35% of our revenue three years from now.”
Boeing had been 75% of Sekisui’s business but “will be less than 50% in a few years,” Cagnatel said.
He expects to have $200 million in revenue within five years and to be back up to between 800 and 1,000 employees.
Sekisui bought the former Aim Aerospace in 2017. It had been a low-pay operation with high employee turnover, and the plants hadn’t been upgraded in years.
Cagnatel came in as CEO with a mission to transform the company and had turned it around before the pandemic hit. Now the shock of the downsizing in the past two years has accelerated the modernization.
The new automated systems demand higher skill employees, with higher pay.
Even as he laid people off when business slumped, Cagnatel began the process of hiring engineers and shop floor workers with new skills, competing in a tight labor market with high-tech and space companies.
“This is not a low-cost workforce,” Cagnatel said. “They’re highly technical specialist jobs with components that are highly technologically advanced.”
“I’m very keen to put works centers in place where I can pay people way above what manufacturing jobs do around the globe,” he said. “I want to go and say look, you work in a tech company. At the end of the day, this is aerospace, you’re going to be paid well.”
He said he must offer a wage “a lot more” than the $18-$22 per hour range.
As a result, Cagnatel says he’s creating “a place where people want to come to have a career” and the workforce is more diverse, with half of his leadership team female.
Return of 787 deliveries won’t fix everything
Still, there remain serious challenges in the business.
“The supply chain on materials is not use to such an abrupt stop,” Cagnatel said. “Plus with all the constraints created by COVID in the logistics systems, there are significant gaps in the supply chain.”
As a result, he said raw material prices have vastly inflated. Whereas the suppliers of those materials in the past locked in long-term agreements with minor inflation, Cagnatel said now “the pricing landscape changes every three to six months with huge escalations.”
“We’re talking about double-digit percentage escalations,” he said. “And you don’t have control over it. You don’t know what’s it’s going to be like in six months, 12 months, 18 months. You can only predict it’s going to be very high.”
While Boeing halted 787 deliveries due to quality defects, there is an expectation that the Federal Aviation Administration will grant approval to resume deliveries as soon as next month.
But Cagnatel says that won’t mean a quick boost for 787 suppliers, all of whom are concerned about how quickly Boeing can ramp up again.
“I don’t expect a very rapid ramp up after this,” he said. “It’s going to take some time.”
“There are 120 aircraft parked in South Carolina that need to be delivered” before building too many new jets, he said.
In addition, Cagnatel said, “aerospace typically doesn’t just stop and restart.”
“Aerospace is a very controlled supply chain, very balanced. The supply chain now is completely out of balance,” he said. “We don’t know how much stock of the finished components that we deliver Boeing has already got.”
Cagnatel said the mood of the company representatives on the Washington state delegation to the Air Show is “very positive.”
“Everybody sees that the ramp-up is coming. Everybody’s asking the question: 787 — When? How?” he said. “But there are a lot of looming concerns over availability of materials and pricing.”