Honest insights into the state of aerospace industry in 2024.
Platitudes and feature stories will only get us so far. While we are fond of featuring companies in the pages of this magazine and positively telling their stories, there are issues to uncover. Let’s look honestly at some of the biggest concerns and industry issues with three anonymous aerospace insiders, each a seasoned expert in their field. In this article, we will learn from upper echelon C-Suite leaders of three regional businesses serving the aerospace manufacturing industry. They include company owners/ co-owners, a president, and a vice-president of operations. All our contributors are long-tenured in their businesses and the aerospace industry.
Leaders’ concerns range from continuing lost business post-pandemic, to workforce and raw materials issues. One leader is deeply concerned about the profound impact of lost post-pandemic sales, which is reverberating throughout the industry. Another is concerned about governance and regulations.
Quality concerns are real and must be remedied. However, even more concerning is a decade-long issue about workforce development. The industry’s ability to hire educated and trained workers is not just a concern, it’s a pressing issue that demands immediate attention.
Workforce
Disparity in finding qualified, willing, and trained employees remains a great challenge. One of our business leaders said, “We have seen much of our work go to Mexico and the Philippines, which again impacts sales. The availability of skilled workers, or any workers, seems to be at an all-time low. Few applications are received for any job, and many applicants either do not respond to an interview request or last a few days before becoming a ‘no-show.'”
This leader added, “Manpower will need to be in place to serve the expected wave of work that we all believe is just around the corner.”
With hope for the future, our expert shared some solutions to the workforce concerns. “High schools, junior colleges, teen centers — they all need to encourage young folks to get out into the workforce. Emerging workers need guidance to prepare and the confidence to apply themselves to the job. Work ethic must be taught. High minimum wages are a double-edged sword. There is no room or budget to hire someone at $15 to $20 per hour that has zero work experience. That means every employee must come in and earn it. If it’s hard to find a kid to mow your grass, how are we going to build a workforce from kids that, in general, don’t want to apply themselves? For every five young adults hired, only one lasts more than the first two weeks, and we have a nice work environment. High labor rates mean we will not compete well, and the work will go overseas.”
Sales and incoming work
Post-pandemic, suppliers’ sales have slowed, making forecasting and hiring more challenging.
One leader said, “The industry is still in a bit of a slump following COVID. We do not see the kind of R&D or rapid manufacturing requests we did before COVID-19.
“The big changes, of course, came after COVID. A 60 percent reduction in sales in aerospace was almost immediate. Sales are slowly returning, but the availability of raw materials has been a big challenge, and material costs have skyrocketed. Labor rates have also skyrocketed, transitioning into much more work going overseas to low-cost countries.”
Another expert echoed those remarks and added, “I believe the industry is still recovering from the ‘COVID hangover,’ which spurred uncertainty in the market. High interest rates are cooling the economy slowly, and the change to the R&D tax credit at the federal level has stifled innovation.”
Our third expert shared that there are “significantly more supply chain disruptions, rising costs, and more volatility of demand, e.g., demand was down during COVID-19, up significantly after the COVID “hockey stick,’ and down due to OEM problems.”
They added that these changes have caused “a slowdown in demand due to excessive inventories at the OEMs and Tier 1s, caused partly by an overreaction to the COVID-19 hockey stick and supply chain disruptions, as well as OEM issues affecting build rates.”
“I believe the industry is still recovering from the ‘COVID hangover,’ which spurred uncertainty in the market.”
OEM concerns and challenges
With hundreds of suppliers in the Pacific Northwest reliant on the OEM, many want to regain confidence in the industry we all rely upon.
One of our experts who makes composite details and assemblies for interiors said, “I could probably write a novel on the topic, but another big piece of the puzzle is the fact that the OEM is failing. They are failing their supply chain, which is all the rest of us. The ripple effect is tremendous in the Northwest, forcing many to shut their doors. A great deal of blame continues to fall on the supply chain, but the culture at the OEM is doing the damage. In place of determining the true root cause, comes the blame game. If the supplier can be blamed, then the costs can be levied on them. It’s not much of a true partnership when the big guy is always pressing the little guys to pay or die. Suppliers that can, survive without too much invested in serving the OEM and have a much better chance at survival.”
“Our biggest challenge is high price and lead times; lead times seem to be fallout from a lack of an effective workforce, starting with the construction of the raw materials. Where is our workforce? Don’t know the answer to that.”
Our third expert said they are positive about the future of aerospace but have ongoing concerns about the OEM. “A lot of folks that were heavy into aerospace are now actively trying to diversify their business.”
Regulations/governance
Our circuit board maker feels that the government should be responsible for fixing the current problems and said what is needed is “Less polarization and change at the federal level. Moderate, common-sense solutions working across the aisles to address things like tax policy, inflation, housing, interest rates, and immigration as related to a solution to our workforce shortages.”
This person said that Congress is responsible. “Full stop. They have to stop retreating to their respective corners and actually get something worthwhile done.”
However, many may have little hope for changes, as reflected in this sentiment: “I imagine nothing will happen until after the presidential election, and even then, the election will be demoralizing for half of the country no matter who wins, so I have very low confidence things will get better at the federal level for at least another four-plus years.”
Raw materials and supply chain
Like with consumer goods, inflation has increased production costs in aerospace manufacturing. One expert shared, “Raw material resources have extended our lead times, and confidence in meeting deadlines is low because of the commonly late deliveries. Expediting materials is much more frequent than in years past, and the cost of shipping has impacted those costs.”
RETURNING CONFIDENCE AND HOPE
As of now, our experts said, “We all seem to be in the same boat. Things are a bit slow, and everyone seems to be waiting to see how things will finally work out. I would really like to see the economy settle in and create a sense of normalcy and predictability for businesses.”
Another person said, “There are some glimmers of hope — exciting, innovative ideas, and opportunities in space and the environment. It’s very slow coming, and businesses are being quite cautious.”
Our expert making components for the flight deck and cabin said, “Get the quarterly-focused Wall Street managers out of the OEM and bring in long-term-focused leadership. We need senior leadership folks focused on ‘decades,’ not ‘quarters,’ of successful operating results.”
The big question is, who can fix industry challenges? One expert said the “OEM’s boards of directors (and shareholders by vote) — and the changes should occur now.”
SUMMARY
Our summary from the trenches cites many statewide and industry concerns. Our third and final expert to weigh in noted that beyond the OEM, they and their peers have concerns about the business climate in Washington, such as “excessive regulations, taxes, and increasing government interference/intrusion in business in general.” One expert said “We’re concerned about liberalism and socialism in state government.” They added that there is a “perception by many business owners that Washington State is riding on momentum from past years and turning down at a rapid pace.” So, aside from concerns about the workforce, raw materials, supply chain, OEM concerns, and challenges, state regulations are causing heartburn for many in the industry. On a positive note, there may be changes afoot following the Boeing plea deal and federal attention on quality that will bring new life into the industry and supply chain. Only time will tell.
