Boeing's Troubled Aircraft Maker Spirit Aerosystems Rejoins the Conglomerate Amid Quality Concerns
Boeing crisis - Boeing brings supplier Spirit back into the Group
Boeing is reportedly bringing back its former subsidiary, Spirit Aerosystems, under its corporate umbrella following a series of issues. Critics have long argued that the division's separation from Boeing made it difficult to maintain quality standards.
Boeing will pay for the acquisition with stocks, valuing Spirit at approximately 4.7 billion dollars, according to Boeing's announcement. The aircraft manufacturer will also assume around 3.6 billion dollars in Spirit's debts. A few hours prior to the deal, Bloomberg reported details of the transaction.
Key Role in Boeing 737
At Spirit, components of Boeing 737 aircraft, including the fuselage, are produced. The company was spun off from Boeing in 2005 and later acquired some parts of wing and fuselage sections for Airbus. A solution had to be found before Boeing could regain ownership of Spirit.
Airbus announced that several Spirit factories will join the European conglomerate instead. Unlike Boeing, Airbus will not pay a purchase price but will receive 559 million dollars as a sort of dowry.
The Division's Separation from Boeing Followed a Trend
The separation from Boeing came at a time when corporations were downsizing and outsourcing activities to save money. However, it became increasingly apparent that the separation from Spirit led to quality issues and a loss of control for Boeing.
In recent years, there have been numerous complaints. For instance, it was discovered that holes in the fuselages of several aircraft were drilled incorrectly at Spirit.
Role in the Alaska Incident
Spirit played a role in the dramatic incident in January when a section of a nearly new Boeing 737-9 Max's fuselage, produced by Spirit and delivered to Boeing, detached in flight from an Alaska Airlines plane. The fragment was removed from Spirit for repairs. Boeing could not locate the relevant documentation - but the National Transportation Safety Board (NTSB) believes that the plane was delivered to the airline without the required two bolts securing the fuselage fragment.
Following the Alaska incident, Boeing faced increased pressure to improve quality control. One of the measures taken was to send more inspectors to Spirit to identify and address any issues on-site rather than after delivery to Boeing's facility. In March, Boeing announced that negotiations for the acquisition of Spirit were underway.
Boeing CEO Dave Calhoun emphasized that the deal was in the interest of airline passengers, the aircraft manufacturer, airlines, and the country as a whole. Some Spirit activities in the defense sector will also transfer to Boeing.
Media: Boeing Faces Potential US Government Lawsuit
According to media reports, the near-catastrophe with the Alaska plane could have severe consequences for Boeing. The "New York Times" and Bloomberg reported that the US Justice Department intends to file a fraud charge against the aircraft manufacturer.
This relates to the agreement Boeing reached to avoid prosecution following the crashes of two 737-Max planes in 2018 and 2019. The company was required to pay a fine of 243.6 million dollars and implement a compliance and ethics program. The Justice Department concluded in May that Boeing had violated the terms of the deal.
Boeing had some time between acknowledging a liability and facing a lawsuit, according to media reports. If Boeing admits fault, the company would have to pay an additional $243.6 million and accept a monitor, Bloomberg wrote.
The crashes of two 737-Max planes in October 2018 and March 2019 resulted in the deaths of 346 people. An investigation found that a software of the planes, intended to assist pilots, interfered more than expected in the control system. Boeing faced criticism as employees of the aircraft manufacturer reportedly deemed special training for the software unnecessary during the type certification process with US regulatory bodies.
Bloomberg Report on Spirit's Report - New York Times Bloomberg on Looming Indictment Boeing Statement Airbus Communiqué
- The series of quality concerns and breakdowns at Spirit Aerosystems, a key producer of Boeing 737 components like fuselages, led to increased pressure on Boeing to regain control.
- The crisis prompted Boeing to announce negotiations for the acquisition of Spirit Aerosystems, which had been spun off in 2005 and later worked with Airbus.
- The United States Department of Justice is reportedly considering filing a fraud charge against Boeing, following media reports from sources such as the New York Times and Bloomberg, in relation to the crashes of two Boeing 737-Max planes.
- The acquisition of Spirit Aerosystems by Boeing, valued at approximately 4.7 billion dollars in stocks, aims to improve quality standards and control, as critics argue that the division's separation from Boeing caused issues.
- Post-acquisition, some Spirit activities in the defense sector will transfer to Boeing, while other factories will join Airbus S. A. S. following Airbus's announcement of its interest in the division.
