Boeing in Talks to Buy Spirit AeroSystems, a Struggling Supplier – MASHAHER

ISLAM GAMAL2 March 2024Last Update :
Boeing in Talks to Buy Spirit AeroSystems, a Struggling Supplier – MASHAHER


Boeing said on Friday that it was in talks to acquire Spirit AeroSystems, a struggling supplier that the manufacturer spun out nearly two decades ago and that makes the bodies of the 737 Max jet.

In reabsorbing Spirit, Boeing would be seeking to rescue and restructure a troubled but important partner that has been battered by years of losses and quality control problems. Spirit’s problems have also at times limited how fast Boeing can produce Max planes, its most popular commercial jet.

Bringing Spirit, one of the company’s key suppliers, back in house would be a significant strategic shift for Boeing, which has long relied on outsourcing to make its planes. That strategy has come under increasing scrutiny amid concerns about Boeing’s quality issues.

Both companies have faced intense scrutiny since Jan. 5, when a panel on a 737 Max 9 blew out during an Alaska Airlines flight shortly after takeoff, exposing passengers to deafening wind at 16,000 feet. The pilots operating the plane landed it safely with no serious injuries reported. Experts say the episode could have been catastrophic had it happened at a higher altitude with passengers moving about the cabin.

The National Transportation Safety Board said in a report last month that the plane appeared to have left a Boeing factory without the bolts needed to hold the panel, known as a door plug, in place. Door plugs are used to cover gaps in a plane’s body where an emergency exit would have been installed if the jet had the maximum number of seats.

The incident followed two crashes of Max 8 jets in 2018 and 2019 that together killed nearly 350 people. Aviation regulators grounded Max planes for nearly two years after those crashes. That crisis cost Boeing about $20 billion.

Acquiring Spirit could enable Boeing to change the supplier’s policies and production practices more easily, something it has been seeking for a few years from the outside. Problems with quality and operations led to a leadership shake-up at Spirit last fall. Patrick Shanahan, a former Boeing employee and senior Defense Department official, took over as chief executive of Spirit.

“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 in a statement.

“Although there can be no assurance that we will be able to reach an agreement,” the company added, “we are committed to finding ways to continue to improve the safety and quality of the airplanes on which millions of people depend each and every day.”

But buying Spirit could also saddle Boeing with more problems at more factories when regulators are demanding that it improve quality control at its own plants. The Federal Aviation Administration this week gave the company 90 days to come up with a plan to address its quality control issues.

Spirit and other companies that make the components of a plane’s body and wings have faced significant challenges in recent years, said Kevin Michaels, a managing director of AeroDynamic Advisory, a consulting firm.

“It’s kind of a failed market,” he said. “The biggest aerostructures companies are losing copious amounts of money.”

Boeing sold Spirit to an investment firm in 2005, part of a campaign to cut costs and focus more on final assembly of planes. That investment firm, Onex, which is based in Toronto, later listed Spirit on the stock exchange. Spirit soon began earning consistent annual profits in the hundreds of millions of dollars.

But the company suffered a setback in the early 2010s, after the financial crisis. Its fortunes improved in the middle of the decade, but Spirit and its have peers suffered more recently in part because plane makers like Boeing and Airbus have pressured suppliers to cut costs even as jets have grown more complicated, Mr. Michaels said.

Spirit also took a big hit when regulators grounded the Boeing 737 Max jets after the two crashes. Then, in early 2020, the pandemic disrupted supply chains, contributing to rising material costs. Over the past four years, Spirit has lost $2.5 billion.

Any deal between Boeing and Spirit will have ramifications for Airbus, Boeing’s most important competitor in the commercial plane business, because Spirit makes parts for Airbus planes, too. Airbus, which is based in Toulouse, France, declined to comment on Friday on whether it would seek to acquire the pieces of Spirit that supply it with parts.

Spirit shares closed up about 15 percent on Friday after The Wall Street Journal and other news organizations reported that Boeing was in talks to acquire the supplier. Boeing shares fell about 2 percent.

Liz Alderman contributed reporting.


Source Agencies

Leave a Comment

Your email address will not be published. Required fields are marked *


Comments Rules :

Breaking News