The first tangible effects of the month-long Boeing Co. machinist strike have touched down in Connecticut.
Earlier this month, Bristol-based Barnes Group Inc. withdrew its earnings guidance for the full year, citing the ongoing International Association of Machinists strike by nearly 28,000 Boeing union workers as the cause.
Barnes, which employs about 600 in Connecticut and 6,200 worldwide, said the strike directly affects its Barnes Aerospace unit’s original equipment manufacturing business, which represents approximately 20 percent of company sales. Barnes supplies engine nozzles for Boeing’s 787 Dreamliner aircraft through General Electric Co., and does work for other major engine and aircraft manufacturers in both the commercial and military markets.
The company’s outlook seemed much brighter back in May, when it raised both its dividend and its earnings guidance and said it planned to buy back stock, which then traded above $30 a share.
Since withdrawing its earnings guidance Oct. 1, Barnes’ shares have plummeted to $14.50.
Brian Koppy, a spokesman for the Barnes Group, said the company believes in the “strong fundamentals” of the aerospace business.
“Clearly, the strike is having a material adverse impact on our Barnes Aerospace segment and that’s the reason we felt it was in the best interest of our investors to take our guidance off the table,” Koppy said. “One of the things we’re stressing is the Boeing strike is distorting the long-term favorable prospect of the aerospace. The strike will end and the strong fundamentals in the industry will return.”
In July, the Barnes Group reported a second quarter income of $34.6 million, or $.60 per diluted share, a 22 percent increase in earnings over a year earlier. The company attributed the growth to a strong demand in aerospace manufacturing and aftermarket businesses, as well as its international industrial businesses.
The company noted its manufacturing order backlog had decreased to $424.4 million from $472.6 million at the end of last year, partially because of deferments of approximately $20 million related to delays in the Boeing 787 Dreamliner’s delivery schedule.
Last month, the company’s aerospace division tripled the size of its operation in Utah by opening a 165,000-foot facility in Ogden.
The Barnes Group will give a more detailed picture of the strike’s effect Oct. 31, when it releases third quarter results.
Broader Impact?
Though the Barnes Group is the first local company to announce an impact from the strike that started Sept. 6, Boeing’s numerous local suppliers will certainly feel the effects of the work stoppage.
“They clearly will be affected,” said Al Samuel, president of Aerospace Components Manufacturers, a network of Connecticut-based aerospace companies. “We all talked about this a week ago. From the companies present at the time, it didn’t seem to be a big issue, but these things tend to take on a life of their own. It certainly wouldn’t surprise me that engine makers would slow down.”
Kaman Corp., a Bloomfield-based conglomerate that supplies Boeing on several aircraft models, may also be affected by the strike. Kaman produces parts and does subassemblies on the Boeing C-17’s internal wing structures and Boeing 777 and 767 wing trailing edges. Kaman does commercial work for Boeing in both Jacksonville, Fla., and Wichita, Kan., as well as at is Kamatics Corp. headquarters in Bloomfield.
As for how Kaman will be affected by the Boeing strike, the company could not say.
“Kaman does not provide earnings guidance,” the company said in a statement. “However, we can say that our aerospace businesses are diversified with respect to products, platforms and customer base, which we believe aids Kaman in a circumstance such as the current labor action at Boeing’s commercial airplanes unit.”
Dreamliner Delays
Hamilton Sundstrand, the Windsor Locks-based United Technologies Corp. division, provides components on each Boeing 787 Dreamliner, a project that has been plagued by delays. Boeing warned that the strike could possibly delay the first flight of the Dreamliner, scheduled for the end of this year.
Hamilton spokesman Dan Coulum said the company will provide a better idea of the strike’s impact when UTC releases its quarterly earnings report this week.
“We continue to work very closely with Boeing on their requirements during the strike,” Coulum said. “In the short term, we do not expect any negative material impact on our financials. Longer term, we continue to assess the impact. We will have more to say about the issue during the UTC analysts’ conference call on Oct. 16.”
Local aerospace industry officials pointed out that many companies in the area may not be as affected by the Boeing strike because they predominately supply to UTC divisions or directly to the military. The last major Boeing strike took place in 2005. It lasted 28 days and had minimal impact on Connecticut’s aerospace industry.
Since the latest strike began, Boeing has received 24 orders, including four 777s and 11 for 737s.
All Nippon Airways of Japan, Boeing’s launch customer for the 787 Dreamliner, also ordered nine 767s to cover its requirements during the delay in the delivery of the Dreamliner.
Boeing is expected to pay billions of dollars penalty fees for late delivery.
