RTX sees labor challenges, exploring alternatives to China suppliers

5:16 pm Tuesday, September 10th, 2024

By Tim Hepher and David Shepardson

WASHINGTON (Reuters) – The head of aerospace and defense giant RTX sounded the alarm on global supply chains in the wake of the COVID-19 pandemic and warned that finding qualified labor for in-demand jet industry production lines remains a “huge” challenge.

“The supply chain has not recovered,” Executive Chairman Greg Hayes told the Global Aerospace Summit hosted by the U.S. Chamber of Commerce on Tuesday.

Aerospace bosses attending one of the industry’s key annual events warned of ongoing disruption as high demand clashes with parts and labor shortages.

The head of France’s Safran said aerospace was reeling from a succession of shocks, from an exodus of labor during the pandemic to problems with supplies of raw materials and higher energy prices following Russia’s invasion of Ukraine.

All this comes as the industry faces high demand for new planes and engines at the same time as repair shops compete for similar parts to keep older planes flying, as airlines mobilize all the capacity they can to serve a rebound in air travel.

“We are in a period where there has never been such a tension between very strong demand and a supply chain that has been under pressure and suffered many shocks,” Safran CEO Olivier Andries said, adding he expected more of this in 2025.

Geopolitical tensions also loom over the industry.

Hayes said RTX is reviewing its options when it comes to its Chinese suppliers in the event of any sudden worsening of current tensions, adding that RTX is making sure it has dual sources for all of its key components.

“We’re also trying to minimize the geopolitical risk by saying – OK, we’ve got 2,000 suppliers in China today. What happens if, and we don’t know what that if is – what happens if and how are we going to deal with that?” Hayes said.

“So we have been actively working again, not to pull suppliers or not to pull out of China, but to make sure that we have alternatives if we know something bad does happen.”

A Chinese invasion of Taiwan would prompt the U.S. government to impose sanctions on China that could significantly impact U.S. companies. RTX halted purchases from Russian suppliers after Russia’s invasion of Ukraine.

RTX has 14,000 suppliers worldwide.

“We monitor them every single day, not just for their delivery performance and quality, but also for their financial health and their staffing,” Hayes said.

“Today, it’s still a huge challenge to find qualified folks to work on some of these products and that is I’m afraid not gotten better nearly as quickly as demand has recovered.”

(Reporting by Tim Hepher and David Shepardson in Washington; Editing by Nick Zieminski and Deepa Babington)