Boeing said Monday it has agreed to buy a major supplier, Spirit AeroSystems, ending a nearly two-decade experiment in outsourcing production of major components for its commercial planes, including the body of the 737 Max and parts for the 767, 777 and 787.
By purchasing Spirit, Boeing hopes to stem the quality problems that have plagued the supplier in recent years. Although it already has significant influence over Spirit, Boeing will be able to more easily monitor and change production practices by taking ownership of the company. Boeing has also taken internal steps to improve quality, after a harrowing incident in which a panel tore off one of its planes during a flight in January.
“By reintegrating Spirit,” Boeing Chief Executive Dave Calhoun said in a statement, the company “can fully align” its production and safety systems with its workforce.
The deal, which was widely anticipated, was valued at $4.7 billion in stock or $8.3 billion including Spirit’s debt. It must be approved by regulators and Spirit shareholders to be finalized. Boeing will also sell part of Spirit to Airbus, its European rival, as part of the transaction. Boeing said the Spirit acquisition is expected to be completed by the middle of next year.
The purchase represents a strategic shift for Boeing, which began relying more on independent suppliers in the 2000s to cut costs and boost profits. Spirit was created during that outsourcing push in 2005, when Boeing sold a division in Wichita, Kansas, and operations in Oklahoma.
In addition to its work for Boeing, Spirit manufactures components for aerospace companies such as Airbus, Bombardier, Lockheed Martin, Northrop Grumman and Rolls-Royce. Boeing accounted for 64 percent of Spirit’s net revenue last year, while Airbus accounted for 19 percent. Boeing offered to buy Spirit at $37.25 per share, a 30 percent premium to Spirit’s stock price in late February, before the two companies announced they were in talks.
Spirit’s quality problems led to a management shakeup last fall, in which Patrick Shanahan, a former Boeing executive and former top Defense Department official, became chief executive. At Boeing, Mr. Shanahan was considered an accomplished leader, capable of quickly turning around struggling programs or units. He is now a leading candidate to replace Mr. Calhoun, who plans to resign by the end of the year.
But Boeing has its own quality problems. The company has been under intense scrutiny since the Jan. 5 incident in which a panel on a 737 Max 9 exploded during an Alaska Airlines flight shortly after takeoff. The panel, known as a door stopper, covers the space left by an unnecessary emergency exit.
News of the Spirit deal came hours after a report that federal officials planned to offer Boeing a plea deal in a fraud case related to two fatal crashes more than five years ago in which 346 people died.
Although no serious injuries were reported in the January incident, the consequences could have been much more serious if the panel had exploded at a higher altitude while passengers were moving around the cabin. The National Transportation Safety Board said the plane appeared to have left a Boeing factory without the necessary bolts to secure the plug, and the company said it could not find documentation of that work. The cap had been removed so Spirit workers could make repairs nearby.
In response, Boeing has made several changes in recent months. It said it has expanded training, simplified plans and processes and increased inspections at its 737 plant in Renton, Washington, as well as at Spirit. Since March, it has also stopped accepting 737 bodies, or fuselages, from Spirit that don’t fully meet Boeing’s standards. It had previously tolerated some defects that could be fixed later, in the interest of keeping production moving.
The change has brought significant benefits, Elizabeth Lund, Boeing’s chief quality officer, told reporters at the factory last week. Boeing now has to fix far fewer major defects, she added, and the company is able to assemble the Max much more quickly once the bodies arrive in Renton.
Boeing also said it wants to reduce its practice of performing manufacturing tasks out of sequence, also known as moving work. Some moving work is considered necessary, but too much work can disrupt the complex process of making airplanes, contributing to defects and poor execution.
During the briefing with reporters, Lund also shared new details about how the plane involved in the January flight left the factory without the door plug fully secured. After the plug was removed to make nearby repairs, a crew prepared the plane to be moved outside, reattaching the plug without its bolts, which was not that crew’s responsibility, she said.
Lund’s disclosure of new information, along with other comments during the briefing, sparked fury at the NTSB, which severely reprimanded Boeing for violating rules about discussing an ongoing investigation.
Boeing apologized to the safety board, acknowledging that it “exceeded the NTSB’s role as a source of investigative information.”
