Boeing says it’s in talks to buy Spirit AeroSystems, key supplier on troubled 737 Max
Mar 1, 2024, 4:27 PM
DALLAS (AP) — Boeing said Friday that it is in preliminary talks 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 supplier back into the Boeing fold would improve plane quality and safety, which has come under increasing scrutiny by regulators, Congress and airlines.
Buying Spirit back would reverse a longtime Boeing strategy of outsourcing key work on its passenger planes. That approach has been criticized as problems at Spirit have disrupted production and delivery of popular Boeing jetliners including 737s and 787s.
Concerns about quality came to a head after the Jan. 5 blowout of a panel on an Alaska 737 Max 9 at 16,000 feet over Oregon.
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Days after the incident, the Federal Aviation Administration announced increased oversight of Boeing and Spirit. This week, the FAA gave Boeing 90 days to submit a plan to improve quality and address safety concerns raised by a panel of experts who spent a year studying the company.
Boeing CEO David Calhoun has long defended the outsourcing strategy, but his tone changed after the blowout. On Jan. 31, as Boeing reported a fourth-quarter loss, Calhoun said that outsourcing probably went too far.
In a statement Friday, the company said, “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.”
A deal would give Boeing more control over its production chain, but fixing Spirit would present the company with new challenges while regulators are pressuring the company to improve its own work. And it could add to Boeing’s debt load, already at $52 billion.
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% after media reports that the two companies were talking about a sale.
Boeing spun off Spirit in 2005. 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.
Spirit — which is not related to Spirit Airlines — 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.
Things seemed to be going more smoothly until the Alaska Airlines incident. Investigators said a panel used in place of an extra emergency door 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, during a tour of the Spirit factory in Wichita, Kansas, Calhoun and Shanahan pledged to work together to improve manufacturing quality. “We will restore confidence,” Shanahan vowed.
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 the two companies 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, saying it would provide $100 million for Spirit to retool its factory and adjust prices to give the supplier another $455 million over two years.
