Abhijeet Ganapavaram, Allison Lampert and Valerie Insinna
(Reuters) – Boeing said on Friday it is in advanced talks to buy its former subsidiary Spirit AeroSystems (NYSE:) as it tries to get control of the massive crisis caused by the January 5 mid-air explosion of a control panel.
In a statement, the aircraft maker said it believes its reintegration with Spirit will improve safety and quality.
Separately, Reuters was the first to report on Friday that the company had told suppliers it was delaying an expected increase in aircraft production as it tries to restore industry confidence and meet demands from regulators to improve oversight of its safety and quality control systems.
Boeing (NYSE:) has been recovering for weeks from the 737 MAX incident, in which a door plug came off 16,000 feet (4,877 meters) above the ground. U.S. aviation regulators have already capped production, and carriers are negotiating additional deliveries of the planes with their larger rival Airbus.
Reuters reported last month that years of decentralization of Boeing’s aircraft manufacturing capacity, along with an exodus of experienced workers and aggressive cost-cutting, had impacted quality. Bringing Spirit back into the fold could solve some of these quality problems, as it would give Boeing more control over production.
Spirit was spun off in 2005 and has struggled in recent years with pricing pressures and problems that have slowed aircraft deliveries and depleted its balance sheet. The company has hired bankers and held preliminary talks with Boeing, the Wall Street Journal reported earlier Friday.
Such a move could also help Boeing lower Spirit’s production costs, a senior industry source told Reuters. Boeing previously considered buying out Spirit AeroSystems, but the prospect of a higher buyout price discouraged such a move, the source said.
However, Spirit’s shares have fallen 70% over the past five years, and its market value of $3.3 billion falls far short of Boeing’s $124 billion.
Spirit declined to comment.
“Boeing likely realizes that selling its Wichita operations, which form the core of Spirit AeroSystems, was a strategic mistake,” said Scott Mikus, a research fellow at Melius Research.
Spirit shares jumped more than 15% in regular trading Friday, while Boeing shares fell more than 1.8%.
BOEING AND REGULATORS
The US Federal Aviation Administration in late January barred Boeing from increasing production of the 737 MAX as it pushes for changes.
On February 12, FAA Chairman Mike Whitaker visited the Boeing plant in Renton, Washington, where the 737 MAX line is made, and expressed concern about some of the things he saw during the tour, CEO Dave Calhoun earlier this week, two people briefed him on it. question. reported Reuters.
Boeing had to delay plans to increase production from 38 to 42 planes a month until June, from its original target date in February, according to Boeing’s latest master 737 delivery schedule seen by Reuters. Boeing has also delayed subsequent production increases to 2024 and 2025.
Spirit, one of the industry’s largest makers of large aircraft structures, has struggled over the past several quarters with cash flow problems and quality issues related to the fuselages it makes for Boeing’s 737 narrowbody jets.
The company is also exploring sales opportunities in Ireland, where wings for the Airbus A220 jet are made, as it would be unusual for Boeing to supply wings to a rival.
“For Boeing, this does give them an opportunity to bring Spirit in-house and solve their problems, but Boeing certainly has its problems and has hardly been covered in glory lately when it comes to execution,” said an analyst at Vertical Research Partners. . Robert Stallard.
Investigators are still trying to definitively determine responsibility for the Jan. 5 incident. Spirit made the panel, but Boeing removed it to repair damage to the rivets and then put it back, according to a preliminary report by U.S. investigators, who found photographs showing the Boeing panel apparently missing key bolts.