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ERROR: type should be string, got "https://www.barrons.com/articles/boeing-stock-rises-on-737-max-production-announcement-that-may-be-premature-51590684069\nBoeing Stock Rises on 737 MAX Production Announcement. That May Be Premature.\nAl Root\nMay 28, 2020 12:41 pm ET\nPhotograph by Stephen Brashear/Getty Images\nBoeing announced Wednesday evening it will restart production of the troubled 737 MAX jet. The move is boosting Boeing’s stock price, but, quite frankly, it probably shouldn’t be. The move isn’t a surprise, as Boeing hinted at it as recently as late April.\nStill, a production restart is important for investors in another way. Boeing (ticker: BA) has to improve production efficiency to prepare for a rockier aviation future.\nThe MAX, Boeing’s newest model single-aisle plane, has been grounded worldwide since mid-March 2019 following two deadly crashes within two months. Management has been working for months fixing software and other problem and intends to start delivering recertified planes to airline customers by late summer 2020.\nEven after the plane was grounded by global aviation authorities, Boeing built and parked about 450 jets before halting production. Now that the assembly line is running again, production will ramp up slowly.\nThe company is planning to build about 31 jets a month in 2021. Before the plane was grounded and the Covid-19 pandemic hit, Boeing was making 42 MAX jets a month. At one point in the not too distant past, it planned to make 57 MAX jets a month by year-end 2020. The world, for Boeing, changed very quickly.\nThat means Boeing has to cut costs to maintain profit margins. The company announced layoffs Wednesday. It will also make changes to the production process to save more money.\n“We’ll continue to see expenditures on the 737 program despite the production suspension as we invest in the production system health to de-risk our future production rate,” said Chief Financial Officer Greg Smith back in January.\nMaking a plane is a little like making a car, just slower. The MAX is manufactured on an assembly line in Renton, Wash. Fuselages—the giant metal tubes—arrive via train from Wichita, Kan. There are, very roughly, 10 stations in the Renton assembly line.\nEach station has workers doing separate tasks, such as plane interiors or wing work. Wings are assembled in a different part of the facility and then married to the fuselage. The incoming fuselage is ready for flight in about 10 days. It’s an impressive process. After all, a 737 jet has more than 600,000 parts.\nBoeing told Barron’s that 737 MAX production was starting at a low rate, but declined to be more specific regarding changes to the production system.\nChanges matter because costs are rising. On its first-quarter earnings conference call, Boeing management said lower production rates will result in a significant cost headwind.\nThe math is complicated—because of airplane accounting—but cost headwinds can run into the billions of dollars a year. That works out to, very roughly, millions per plane or about 1% to 4% of a MAX purchase price. That’s the kind of money Boeing is trying to save as it ramps production back up.\nBenchmark analyst Josh Sullivan called the restart a positive development. It’s another sign the MAX will come back. Sullivan rates shares Buy and has a $180 price target for the stock.\nBoeing shares are up 3.2%, at $154.31, in recent trading, The Dow Jones Industrial Average and S&P 500 are up 0.5% and 0.7%, respectively.\nBut Boeing shares have a long way to go to reach prior highs. Year to date, shares are still down about 53%. The entire commercial aerospace value chain has been hammered by the pandemic. Aerospace supplier stocks Barron’s tracks are down about 35%.\nStock in U.S. airlines are down about 50% so far in 2020. Fewer people are flying these days and, barring a Covid-19 vaccine, the outlook for commercial air travel is looking weaker compared with recent history.\nWrite to Al Root at allen.root@dowjones.com\nBoeing announced Wednesday evening it will restart production of the troubled 737 MAX jet."