Important Points
In March, Boeing announced that negotiations to buy Spirit AeroSystems, a manufacturer of fuselages, were ongoing.
The agreement follows a significant reorganization of Boeing's leadership team and a door panel blowout that occurred in midair, causing a new safety issue.
Spirit and Boeing have had difficulty eliminating manufacturing defects from Boeing's best-selling aircraft.
Boeing announced on Monday that it will repurchase Spirit AeroSystems, a struggling manufacturer of fuselages, in an all-stock transaction that it claims will enhance quality assurance and safety.
It stated that it has agreed to pay $37.25 per share in Boeing stock for Spirit, resulting in an equity value of $4.7 billion for the aerospace company. According to Boeing, the acquisition is worth $8.3 billion when Spirit is debt is taken into account. Spirit is market value is estimated to be at $3.8 billion after its shares closed on Friday at $32.87 per.
Following weeks of turmoil for the company when a nearly new Boeing 737 Max 9 fuselage panel burst off midair on an Alaska Airlines aircraft, Boeing announced in March that it was in talks to purchase the Wichita, Kansas-based company. Spirit manufactures fuselages for many aircraft, such as the 737 and portions of Boeing's 787 Dreamliners.
Spirit AeroSystems is the current name of the Kansas and Oklahoma-based operations that Boeing spun out in 2005. About 25% of Spirit is income last year came from producing parts for Airbus, Boeing's principal competitor, while the remaining 70% came from Boeing, according to a securities filing.
Spirit is internalization will "completely connect" the businesses' manufacturing processes and workforces, according to a statement made by Boeing CEO Dave Calhoun on Monday. Calhoun has announced his resignation at the end of the year.
In a statement to staff, Calhoun stated, "Of the numerous steps we are taking as a company, this is one of the most crucial in demonstrating our unshakeable commitment to increase quality and make sure that Boeing is the company the world needs it to be."
He stated that, barring regulatory permission, Spirit shareholder approval, and the sale of Spirit is Airbus aircraft operations, he anticipates the deal closing in the middle of 2025.
Pat Shanahan, the CEO of Spirit, is a potential Calhoun replacement.
Meanwhile, Airbus announced on Monday that it and Spirit had come to an arrangement whereby Spirit will pay the European aircraft maker $559 million to acquire its production lines for Airbus aircraft. These include the A220 pylons in Wichita, the A350 fuselage sections in North Carolina, and the operations in Belfast, Northern Ireland, which create the A220's wings and mid-fuselage.
increasing pressure
According to an early National Transportation Safety Board investigation on the Jan. 5 Alaska Airlines incident, it seems the door plug bolts were not on the Max 9 when it left Boeing's manufacturing and was given to Alaska Airlines months earlier.
That was the most significant of several production issues with Boeing aircraft, including fuselages produced by Spirit that had misdrilled holes and fuselage panels that were not joined correctly. Boeing has made an effort to enhance quality by only accepting defect-free fuselages. This minimizes the need for out-of-order repairs or extra manufacturing stages, which also lowers the possibility of errors.
Boeing's deliveries of new aircraft to airlines have halted due to the wider safety issue brought on by the door plug explosion on the Alaskan flight, which has also caused financial losses for both Spirit and Boeing. In May, Boeing's CFO stated that the business would burn through roughly $8 billion in cash in the first half of 2024 rather than making any.
This year, Boeing's stock has dropped by more than 30%.
According to the Federal Aviation Administration, Boeing cannot increase its output unless its production lines meet its requirements.
During a June Senate hearing, senators grilled Calhoun about the company's safety record and what they saw as a lack of progress following two fatal Max crashes.
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