Daniele Cagnatel, CEO of Renton, Washington-based Sekisui Aerospace, called Wednesday for a transformation of the low-wage, old-technology model common among Washington state’s aerospace manufacturers.
“When we are competing with retail, when we are competing with, frankly, the Starbucks around the corner or with Walmart, you got to ask yourself the question, why?” Cagnatel said, speaking at an annual conference of aerospace suppliers in Lynnwood. “We are in manufacturing and we are in aerospace. We should be at the top end of the pay scale and we are fighting at the bottom.”
“Forget about $18 or $20 an hour,” he added. “Why can’t we pay $27, $28, $29, $30 an hour to do jobs in aerospace manufacturing?”
In an unusual admission from a CEO, Cagnatel conceded that “especially for the production workforce, the gap between good pay and just-get-by pay to what management gets was way too high.”
At the Pacific Northwest Aerospace Alliance conference this week, the acute shortage of skilled labor as the pandemic wanes was a hot topic. It has constrained production throughout the aerospace supply chain, right up to slowing Boeing jet deliveries.
Though air travel has surged since the pandemic downturn and demand for new planes is high, Airbus and Boeing cannot meet the demand because production is stunted by problems with the supply of parts, longtime aviation analyst Richard Aboulafia, of consultancy AeroDynamic Advisory, pointed out at the conference.
And the main constraint is a lack of trained labor.
“The clear issue is that people have left the industry,” Cagnatel said.
Cagnatel’s vision for stanching that flow entails much more automation and digitized workflows that will eliminate unskilled jobs but provide highly paid careers for a smaller number of skilled workers.
He views this, he said, as a “societal step forward,” replacing exploitative jobs with jobs that can become a career.
At the levels below the crown jewel of Boeing, Washington state’s aerospace industry has for years been a relatively low-skilled, low-wage sector pressured by the cost-cutting demanded by Boeing at the top of the food chain.
Hiring replacement workers now is most difficult at the lower levels of manufacturing, where people can now find unskilled work paying similar wages.
“The days of going out to a temp agency and getting a bunch of people within a couple of days are gone,” said Allison Budvarson, co-founder and chief operating officer of Renton-based electronic components maker Out of the Box Manufacturing, while sharing the stage with Cagnatel.
Wednesday’s panel of supplier executives, most starkly Cagnatel, contended that the industry must move fast to invest in automated, digitized machinery and reward workers who operate that machinery with higher pay and a clear path to a career.
“We lost a lot of people who had a lot of experience and now we have to hire the new generations — and they have a different set of priorities and skill sets,” Cagnatel said.
In the past, he said, pay was so low “it was acceptable for people to have two jobs, and acceptable for people to drive an Uber at the weekend.
“That is not acceptable any more, especially to the new generations, and rightly so. People want to be able to have a good life, and they are entitled to,” Cagnatel added. “The gap has to reduce. We’ll have to pay people more.
“I don’t want to talk about competing with Starbucks,” he said.
In case his audience mistook him for a raving socialist, Cagnatel also outlined how suppliers are currently caught between rising costs of raw materials and a squeeze for lower pricing from the top of the supply chain at Boeing.
“At the end of the day, we all need to support the program,” he said. “If we don’t have money, it doesn’t work.”
“But you have to do it in a way which is very ethical, and value-driven,” he said.
Sharks circle
In a follow-up interview Thursday with The Seattle Times, Cagnatel said he was being deliberately provocative at the conference to promote his vision of a way forward.
“We are in a place where we try to save money on the most valuable capital that we’ve got, which is our people, particularly on the shop floor,” he said. “We have to take this wage inflation as an inevitability and perhaps as an opportunity to look at our business differently.”
So how can companies realistically pay the higher wages he advocates?
In a less crusading tone than Cagnatel’s, Budvarson, whose electronics company employs 65 people today and is seeking to hire an additional 10 workers, echoed his thinking.
“It comes down to doing what we can to automate the lower-wage positions, to emphasize technology and capital equipment,” she said. “And then hire the technicians that absolutely can earn that higher hourly wage.”
It’s clear that will take substantial investment — which for smaller companies, now financially stressed, may not be possible.
Bank of America aerospace industry financial analyst Ron Epstein noted the number of private equity representatives at the PNAA conference who are looking to buy up distressed suppliers.
“The sharks are swimming around,” Epstein said. “They smell blood.”
However, with Japanese conglomerate Sekisui at his back, Cagnatel already has the financing he needs and has begun implementing his vision.
Sekisui bought the former AIM Aerospace in 2017. AIM had been a low-pay operation with high employee turnover. Its grimy plants hadn’t been upgraded in years.
Cagnatel came in as CEO with a mission and funding from Sekisui to retool and invest. He upgraded the technology in the plants and installed new digital information flow systems. By 2019, Seksui had 1,500 employees.
When the pandemic hit, business collapsed and he was forced to lay off hundreds of people.
Sekisui has just under 600 employees in Washington state today, manufacturing composite cabin interior parts such as galleys and flight-crew rest areas in Renton and ducting for cabin air-conditioning systems in Sumner.
Cagnatel said with demand now back, he aims to hire 250 people over the next two years. And he said his vision on the way forward to higher wages is intact.
Offering an example, Cagnatel related how he installed new machinery for automated composite systems. In the past, he said the standard approach after such an investment would be to hire a supervisor and a shop floor lead mechanic, then lower-paid machine operators, and inspectors and maintenance technicians, an entire team of relatively low-paid workers.
Instead, he said Sekisui has hired people either skilled in electronics and mechanics or who can be trained well. And these workers will not only operate the machines, but will inspect the components produced and do any required maintenance.
Their training is supplemented by the intelligence of the digitized equipment, which displays on screens all the technicians need to know to control its operation.
“They don’t need a supervisor; they self-manage,” Cagnatel said. “My point is, now you can afford to pay those people $27 an hour.”
As he hires people now, he said he meets personally with the candidates and lays out how through skills training he’s offering a path toward a good salary and the hope of a career.
“We’re not going to go and hire people and be able to pay them $28 an hour tomorrow,” he said. “But if we have the right strategy and change the way we do business, we can get there.”
