Boeing confirms talks to buy Spirit AeroSystems

Synopsis

Boeing is considering buying Spirit AeroSystems, which builds fuselages for its 737 Max jetliners. The move aims to improve quality and safety, addressing concerns over recent manufacturing issues. Spirit, previously owned by Boeing, has faced scrutiny for quality problems, including fuselage panel fit and drilling issues. Both companies confirmed talks, noting potential benefits for aviation safety and quality. Spirit’s stock rose over 15% on the news. Boeing’s plan to acquire Spirit comes as it faces its own manufacturing challenges and increased regulatory scrutiny.

Boeing confirms it's in talks to buy Spirit AeroSystems, its key supplier on the troubled 737 MaxAP
FILE – The logo for Boeing appears on a screen above a trading post on the floor of the New York Stock Exchange, July 13, 2021. Government and aviation-industry experts say Boeing has made some strides toward improving its safety culture, but employees could still be subject to retaliation for reporting issues. That’s one of the findings in a report presented Monday, Feb. 26, 2024 to the Federal Aviation Administration. The experts say that when it comes to safety, there is a “disconnect” between Boeing’s senior management and workers. (AP Photo/Richard Drew, File)

Boeing said Friday that it is in “preliminary discussions” to buy Spirit AeroSystems, which builds fuselages for Boeing 737 Max jetliners, including the one that suffered a door-panel blowout on an Alaska Airlines flight in January.

Boeing used to own Spirit, and it said that bringing the manufacturer back into the Boeing fold would improve plane quality and safety, which has come under increasing scrutiny by regulators, Congress and airlines.

The announcement confirmed media reports that the two companies were talking about a deal. Reaching one could help Boeing respond to critics who have blamed the company’s manufacturing problems in large part on outsourcing key work to Spirit and other suppliers.

Boeing said it has been working with Spirit to improve the quality of the planes they build and that the collaboration “has resulted in preliminary discussions about making Spirit AeroSystems a part of Boeing again.”

“We believe that the reintegration of Boeing and Spirit AeroSystems’ manufacturing operations would further strengthen aviation safety, improve quality and serve the interests of our customers, employees, and shareholders,” Boeing said.

Spirit AeroSystems also confirmed the talks, while cautioning that it could not make any promises about closing a deal or its terms.

Shares of Spirit rose more than 15% by the end of regular trading.

Boeing spun off Spirit in 2005 as part of a strategy to outsource the supply chain for its commercial planes. In recent years, quality problems have mounted at Spirit, including fuselage panels that didn’t fit together precisely enough and holes that were improperly drilled. Those and other flaws held up deliveries of Boeing 737s and 787s.

Spirit removed its CEO in October and replaced him with Patrick Shanahan, a former Boeing executive who served as acting defense secretary in the Trump administration.

Scrutiny of Spirit – which is not related to Spirit Airlines – grew even stronger after an emergency door plug that it made blew off an Alaska Airlines 737 Max 9 over Oregon on Jan. 5.

Investigators said the panel had been removed at a Boeing factory to let Spirit workers fix damaged rivets, and bolts that help hold the panel in place were missing after the repair job. It is not clear who removed the bolts and failed to put them back.

Two weeks later, Boeing CEO David Calhoun toured the Spirit factory in Wichita, Kansas. Calhoun and Shanahan pledged to work together to improve manufacturing quality. Shanahan said Spirit would work with Boeing, regulators and airlines, and he vowed, “We will restore confidence.”

Calhoun has long defended Boeing’s outsourcing, but his tone changed in recent weeks. On Jan. 31, as Boeing reported a fourth-quarter loss, Calhoun said that outsourcing probably went too far.

About 70% of Spirit AeroSystems’ revenue last year came from work done for Boeing, according to Spirit’s latest annual report. That is up from 60% two years earlier. Most of the company’s other revenue comes from making parts for Airbus, Boeing’s European rival.

The talks between Boeing and Spirit were first reported by The Wall Street Journal, which said Spirit hired bankers to consider strategic options and had held preliminary discussions about a sale to Boeing. Spirit also is looking into selling operations in Ireland that make parts for Airbus, the newspaper reported.

Spirit lost $616 million last year and hasn’t turned a full-year profit since 2019. Since then, it has lost more than $2.5 billion. Boeing agreed in October to give more financial help to Spirit. Boeing said it would provide $100 million for Spirit to retool its factory and adjust prices to give the supplier another $455 million over two years.

Boeing has its own manufacturing problems. This week, the Federal Aviation Administration gave the company 90 days to submit a plan to improve quality and to address safety concerns raised by a panel of experts who spent a year studying Boeing.

William Murphy

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