Where have we had shortages that we need to address in terms of the supply chain limitation? Where do we need buffer stock for programs like the PA? So there’s an, I’ll say, analysis that goes on around the work statement so that we can snap back to the higher production rates. Then there’s a set of discussions around the suppliers themselves that the buyers perform to make sure they’re viable that they can continue to produce now. We don’t have the check book to support the whole supply chain or do we have enough warehouse space to store all of the goods that would come through. So it’s a balancing act that we’re performing now. The good news is this isn’t COVID, so we’re talking months, not years. And this is reality of our industry where we have these kinds of disruptions and we’ll roll up our sleeves and figure out a way for everybody to get through this, break, break.
When we think about our internal operations, what I’ve said to the team is that our teammates aren’t 100% variable with rate, okay? It doesn’t make sense to go up and down and have people go in and out the door. We’ve invested a lot in their training, they’re critical part of our company. So we’re trying to find the right balance here. So as the system recovers, we don’t go through a quality issue or a training issue and repeat some of the things that it is hard coming out of COVID. We’re talking about smaller numbers, not big numbers like we did with the shutdown of COVID. But it’s a balance of financials and then maintaining a bridge of talent. We’ll have to make some decisions here in the next couple of weeks, which we’re prepared to do.
Those decisions will be preceded by conversations, the union, other constituencies, but I think we’ve got a very solid approach to being able to respond quickly as Boeing turns their rates back up.
Mark Suchinski: Yes. Gavin, I would just add because it’s a bit of a follow-up on the margin conversation here. As Pat just said, to protect the future production rates, we’re going to be carrying some additional costs, right? And it’s going to have a near-term impact to profitability and cash. But it’s the best thing for the long term. As Pat said, this is — we’re going to be going up in rate. The production, the demand is there. And so we’re working very hard to protect the production system while balancing our financial situation at the same time.
Gavin Parsons: Great. I appreciate the detail. If I could just confirm, I heard you say 31 per month x 12, so about 370 MAX deliveries for the year?
Mark Suchinski: Yes. We would call it roughly 350-ish at this point in time.
Operator: The next question comes from Cai von Rumohr of TD Cowen.
Cai von Rumohr: So Pat, what about labor availability and attrition? Maybe talk about Wichita because Textron also has been building? And talk also about when we talk to — about Ireland and the plant there and the ability to get folks to be able to surge by 50%?
Patrick Shanahan: Sure, Cai. Labor scarcity is a challenge to the industry. We look at what are the big issues. Forgings, raw material and labor come to the top of the list. So here long term in Wichita, one is, it’s a great part of the country for talent and skill where we need to go to market differently. I mean there’s a lot of skill that we have to train for that’s differently than we have done in the past. So you said as your approach to hiring people going to be different than it has been in the past, it definitely will. We have a different workforce. What we’ve found so far is when we train them with the basics, they’re just as talented and as committed as their predecessors. So — but I think how we recruit and how we train is an important part of getting these higher production rates.
We have similar challenges in the marketplace in Northern Ireland. But I think it’s not as industrialized when you kind of think about the Textrons of the world competing for the same type of labor, but labor is always a challenge. Attrition hasn’t been a problem for us. And I think these production rates, it’s always hard to strike the balance of when you bring people on so that you aren’t unnecessarily spending money, but at the same time, give people enough training so that they’re prepared they can produce of the quality that’s required.
Operator: The next question comes from Peter Arment of Baird.
Peter Arment: Mark, maybe I could just ask quickly on Defense. Really good performance in the quarter. I’m just wondering if there was any kind of one-offs on that margin rate of 12 8? Or how sustainable that is just given the nice performance?
Mark Suchinski: Yes. Thanks, Peter. We’ve historically said we target on our Defense program somewhere between 12% to 14%. And I think we were right in the sweet spot there. So there were no what I would consider to be significant benefits that we recorded. I think it was just really good execution on the contracts that we have. The last couple of quarters, we’ve had some challenges on the CH-53K. Our team there has done a wonderful job of really improving the production processes, and I think they’re working very hard to please our Sikorsky customer there. So again, nothing significant, either good or bad. I think as we think about that business going forward, we expect our team to perform. And if they do, we should continue to perform to the margin targets that we’ve put out there.
Operator: The next question comes from Michael Ciarmoli of Truist Securities.
