6 ms·

Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

42 points by bitschubser_ 2y ago

bitschubser_ 2y ago
Archive link: https://archive.is/TE6iR https://archive.is/TE6iR
Jean-Papoulos 2y ago
FYI, Spirit was originally part of Boeing. They're walking back a strategy of outsourcing that is said to be one of the causes of their recent QC problems.
- sofixa 2y ago
  It is one of the causes, because Spirit have had numerous serious quality control lapses they've tried to hide (including as trivial and as serious as failing to drill holes properly). But Boeing itself has the same types of issues, so while it will give them more control, there won't be a fundamental change unless Boeing manage to fix their culture, which is highly unlikely in the short term. Especially while they're preparing for union contract negotiations with multiple crucial unions that have them by the balls.
  - metabagel 2y ago
    Trying to assemble planes with non-union workforce was another cause of Boeing’s production quality problems.
    - sofixa 2y ago
      The people who made the dumb mistake that led to the Alaska Airlines blowout that could have been deadly quite easily were all union members. They worked around the system, removed bolts, did some work, forgot to put back bolts in. (I say they because Boeing, negligently, has no records of who did what, so the whole team of 20 people is responsible). The main theme for Boeing in the past few decades has been lowering costs. Be it by forcing the hands of unions to lower salaries and benefits, or moving production to non-union places (787s in South Carolina), or offloading as much design and manufacturing work to subcontractors as possible, spinning off "unrelated" business such as manufacturing. Most of those were absolute disasters.
  - Zafira 2y ago
    It feels like Boeing divested itself of Spirit to try and avoid the responsibilities of having to manufacture various components, but the awful culture was retained at Spirit and probably made worse by the priorities of its private equity owners.
    - JumpCrisscross 2y ago
      > its private equity owners Spirit is a public company [1]. [1] https://finance.yahoo.com/quote/SPR/key-statistics/ https://finance.yahoo.com/quote/SPR/key-statistics/
  - cratermoon 2y ago
    > Spirit have had numerous serious quality control lapses Boeing spun out Spirit to be able to fire all the experienced union employees and move the work to a state where they could hire non-union people, all part of cost-cutting.
- ahahahahah 2y ago
  Yes, that's covered in more detail in the article.
sofixa 2y ago
The interesting part of the deal is the parts spun off to Airbus. There are some minor components manufactured for Airbus jets, and then there's the A220 (formerly C-series), which as a designed by Bombardier plane, had production in the former Bombardier factories that were sold to Spirit. Most notably, the wings. Airbus only needs the part of Spirit that relate to them, but Spirit's factories are not organised like that (e.g. the Northern Ireland complex that manufacturers the A220 wings also manufactures parts for Bombardier private jets). So it would be interesting exactly how Spirit, Boeing and Airbus split things up, and what the impact on workers and production will be. Also, Airbus was asking to be paid for taking the parts of Spirit related to them because of their sorry state (the Northern Ireland site needs billions of investments, according to them). It's pretty funny if Boeing paid Airbus to take parts off Spirit so that Boeing can begin to try to fix their mistake from 20 years ago. Airbus are definitely making them a favour though (if they refuse, anti-competitive regulators will surely block the deal). So it's a win for Airbus, potential long term win for Boeing. Edit: just read the FT's article on the topic, which is more detailed and covers those topics - Airbus will receive $559 million, and will take over Spirit factories in Northern Ireland, Morocco and France. Spirit will spin-off some other unrelated businesses, including other parts of the Northern Ireland facilities, which might be disastrous for the workforce there. Article: Boeing agrees to buy Spirit AeroSystems in $4.7bn deal - https://on.ft.com/3VMqoiL https://on.ft.com/3VMqoiL via @FT
- cm2187 2y ago
  So then Bombardier will become dependent on Airbus?
  - sofixa 2y ago
    My reading of the situation is that no - Airbus will only take factories that produce components for Airbus planes; Boeing will do the same; and the rest will be spun off. As an example, the Northern Ireland complex will be split (something the union explicitly didn't want because it's unsuitable for it and will lead to job lesses, according to them)
- deleted 2y ago
  [deleted]
code51 2y ago
"in an all-stock deal" https://www.reuters.com/markets/deals/boeing-agrees-deal-buy-spirit-aero-3725-per-share-sources-2024-06-30/ https://www.reuters.com/markets/deals/boeing-agrees-deal-buy...
- dev-jayson 2y ago
  I'm no expert but who in the right mind agrees to getting paid in Boeing stocks?
  - Xylakant 2y ago
    Depends on the stock you’re trading in, and judging from the news, spirit stock might just be even less solid than Boeing. As far as I understand, a lot of Boeings issues are connected to Spirit as a subcontractor. At the very least, you can rest assured that the US government won’t let Boeing fail completely.
  - langsoul-com 2y ago
    Boeing is 64% of spirits revenue. Without Boeing, they don't exist anyway. Not to mention how Boeing's stock might be down, but they are not going to disappear at all. Just from a strategic standpoint, USA has Boeing, EU Airbus and China has the Chinese Boeing /Airbus. Major aviation companies just aren't created any more, no major government would let their strategic assets fall like that.
    - Y_Y 2y ago
      China's commercial aerospace manufacturer is Comac, it was founded in 2008.
      - tankenmate 2y ago
        And 16 years later it has only "sold" less than a dozen airframes overseas (and non delivered). It was only this year (2024) that a Comac aircraft has completed its second international flight (Vietnam). Comac have a long long way to go yet; they have yet to tackle the certification issue let alone the delivery and operational issues. Maybe another decade? Only then could it be considered a proper international airframer.
ggm 2y ago
Outsourcing is lame, and unwinding outsourcing can cost you money to settle issues with other companies which depend on that outsource agent and have regulatory and competition concerns you have to respect. Paying Airbus to take their bit of this, is .. well it's strange but then I guess not. Boeing being Boeing, somebody got a massive KPI for making this outsource happen, then somebody else will get a massive KPI for unwinding it.
- JumpCrisscross 2y ago
  > Outsourcing is lame, and unwinding outsourcing can cost you money Apple (TSMC, Samsung), ARM (all fab), Microsoft (hardware) and NVIDIA (TSMC) each outsource critical parts of their value chains. The opposite of over-outsourcing is NBH syndrome.
  - ggm 2y ago
    Yes, but Apple has a habit of also shafting its outsources, like what they did to the UK designers back in the ipod era: as soon as chip design could make them more money they disintermediated. And now deal direct with the foundry. ARM holdings annoys me. I wish they hadn't stopped doing fab. The potential weakness for the West dependency on TSMC worries me.
    - JumpCrisscross 2y ago
      > potential weakness for the West dependency on TSMC worries me TSMC, in turn, outsources the entire front end of its value chain to its customers. There is nothing wrong with outsourcing. Boeing is just bad at supply chain management.
      - creato 2y ago
        I think all your other examples are healthier because each step has multiple customers. The Boeing/Spirit arrangement looks more like an accounting gimmick than actual outsourcing.
JumpCrisscross 2y ago
Spirit went public in 2006 at $26.00 per share, implying a $3.8bn market cap [1]. That’s about $40.50 ($5.9bn) today [2]. This deal is at $37.25 per share, implying a $4.7bn market cap and $8.3bn enterprise value [3]. Spirit’s shareholders got hosed; value was transferred to its lenders. [1] https://www.seattletimes.com/business/spirit-aerosystems-gains-after-its-143-billion-ipo/ https://www.seattletimes.com/business/spirit-aerosystems-gai... [2] https://www.usinflationcalculator.com/ https://www.usinflationcalculator.com/ [3] https://www.ft.com/content/c35beaff-03d3-4a55-89ff-8adce4e064ac https://www.ft.com/content/c35beaff-03d3-4a55-89ff-8adce4e06...
- tankenmate 2y ago
  Not particularly; a number of Spirit's business units have been running at a loss for over a decade. Another way to put it is that Spirit's shareholders got hosed by Spirit's management.
  - LadyCailin 2y ago
    But the shareholders collectively outrank the company management in a public company. So it is their failure as well, and so they have to take the L on this too.
    - tankenmate 2y ago
      Indeed, I think it would be fair to say that no one covered themselves in glory in the whole debacle.
- michaelt 2y ago
  > Spirit’s shareholders got hosed; value was transferred to its lenders. If you're gonna invest in an aircraft builder that sometimes forgets to put the bolts in, I think only losing 8% is a pretty good deal.
  - ahartmetz 2y ago
    Yep. And the low price, low quality play in that area is and should stay risky.

42 points by bitschubser_ 2y ago

Archive link: https://archive.is/TE6iR https://archive.is/TE6iR

FYI, Spirit was originally part of Boeing. They're walking back a strategy of outsourcing that is said to be one of the causes of their recent QC problems.

sofixa 2y ago
It is one of the causes, because Spirit have had numerous serious quality control lapses they've tried to hide (including as trivial and as serious as failing to drill holes properly). But Boeing itself has the same types of issues, so while it will give them more control, there won't be a fundamental change unless Boeing manage to fix their culture, which is highly unlikely in the short term. Especially while they're preparing for union contract negotiations with multiple crucial unions that have them by the balls.
- metabagel 2y ago
  Trying to assemble planes with non-union workforce was another cause of Boeing’s production quality problems.
  - sofixa 2y ago
    The people who made the dumb mistake that led to the Alaska Airlines blowout that could have been deadly quite easily were all union members. They worked around the system, removed bolts, did some work, forgot to put back bolts in. (I say they because Boeing, negligently, has no records of who did what, so the whole team of 20 people is responsible). The main theme for Boeing in the past few decades has been lowering costs. Be it by forcing the hands of unions to lower salaries and benefits, or moving production to non-union places (787s in South Carolina), or offloading as much design and manufacturing work to subcontractors as possible, spinning off "unrelated" business such as manufacturing. Most of those were absolute disasters.
- Zafira 2y ago
  It feels like Boeing divested itself of Spirit to try and avoid the responsibilities of having to manufacture various components, but the awful culture was retained at Spirit and probably made worse by the priorities of its private equity owners.
  - JumpCrisscross 2y ago
    > its private equity owners Spirit is a public company [1]. [1] https://finance.yahoo.com/quote/SPR/key-statistics/ https://finance.yahoo.com/quote/SPR/key-statistics/
- cratermoon 2y ago
  > Spirit have had numerous serious quality control lapses Boeing spun out Spirit to be able to fire all the experienced union employees and move the work to a state where they could hire non-union people, all part of cost-cutting.
ahahahahah 2y ago
Yes, that's covered in more detail in the article.

sofixa 2y ago

The interesting part of the deal is the parts spun off to Airbus. There are some minor components manufactured for Airbus jets, and then there's the A220 (formerly C-series), which as a designed by Bombardier plane, had production in the former Bombardier factories that were sold to Spirit. Most notably, the wings. Airbus only needs the part of Spirit that relate to them, but Spirit's factories are not organised like that (e.g. the Northern Ireland complex that manufacturers the A220 wings also manufactures parts for Bombardier private jets). So it would be interesting exactly how Spirit, Boeing and Airbus split things up, and what the impact on workers and production will be. Also, Airbus was asking to be paid for taking the parts of Spirit related to them because of their sorry state (the Northern Ireland site needs billions of investments, according to them). It's pretty funny if Boeing paid Airbus to take parts off Spirit so that Boeing can begin to try to fix their mistake from 20 years ago. Airbus are definitely making them a favour though (if they refuse, anti-competitive regulators will surely block the deal). So it's a win for Airbus, potential long term win for Boeing. Edit: just read the FT's article on the topic, which is more detailed and covers those topics - Airbus will receive $559 million, and will take over Spirit factories in Northern Ireland, Morocco and France. Spirit will spin-off some other unrelated businesses, including other parts of the Northern Ireland facilities, which might be disastrous for the workforce there. Article: Boeing agrees to buy Spirit AeroSystems in $4.7bn deal - https://on.ft.com/3VMqoiL https://on.ft.com/3VMqoiL via @FT

cm2187 2y ago
So then Bombardier will become dependent on Airbus?
- sofixa 2y ago
  My reading of the situation is that no - Airbus will only take factories that produce components for Airbus planes; Boeing will do the same; and the rest will be spun off. As an example, the Northern Ireland complex will be split (something the union explicitly didn't want because it's unsuitable for it and will lead to job lesses, according to them)
deleted 2y ago
[deleted]

code51 2y ago

"in an all-stock deal" https://www.reuters.com/markets/deals/boeing-agrees-deal-buy-spirit-aero-3725-per-share-sources-2024-06-30/ https://www.reuters.com/markets/deals/boeing-agrees-deal-buy...

dev-jayson 2y ago
I'm no expert but who in the right mind agrees to getting paid in Boeing stocks?
- Xylakant 2y ago
  Depends on the stock you’re trading in, and judging from the news, spirit stock might just be even less solid than Boeing. As far as I understand, a lot of Boeings issues are connected to Spirit as a subcontractor. At the very least, you can rest assured that the US government won’t let Boeing fail completely.
- langsoul-com 2y ago
  Boeing is 64% of spirits revenue. Without Boeing, they don't exist anyway. Not to mention how Boeing's stock might be down, but they are not going to disappear at all. Just from a strategic standpoint, USA has Boeing, EU Airbus and China has the Chinese Boeing /Airbus. Major aviation companies just aren't created any more, no major government would let their strategic assets fall like that.
  - Y_Y 2y ago
    China's commercial aerospace manufacturer is Comac, it was founded in 2008.
    - tankenmate 2y ago
      And 16 years later it has only "sold" less than a dozen airframes overseas (and non delivered). It was only this year (2024) that a Comac aircraft has completed its second international flight (Vietnam). Comac have a long long way to go yet; they have yet to tackle the certification issue let alone the delivery and operational issues. Maybe another decade? Only then could it be considered a proper international airframer.

ggm 2y ago

Outsourcing is lame, and unwinding outsourcing can cost you money to settle issues with other companies which depend on that outsource agent and have regulatory and competition concerns you have to respect. Paying Airbus to take their bit of this, is .. well it's strange but then I guess not. Boeing being Boeing, somebody got a massive KPI for making this outsource happen, then somebody else will get a massive KPI for unwinding it.

JumpCrisscross 2y ago
> Outsourcing is lame, and unwinding outsourcing can cost you money Apple (TSMC, Samsung), ARM (all fab), Microsoft (hardware) and NVIDIA (TSMC) each outsource critical parts of their value chains. The opposite of over-outsourcing is NBH syndrome.
- ggm 2y ago
  Yes, but Apple has a habit of also shafting its outsources, like what they did to the UK designers back in the ipod era: as soon as chip design could make them more money they disintermediated. And now deal direct with the foundry. ARM holdings annoys me. I wish they hadn't stopped doing fab. The potential weakness for the West dependency on TSMC worries me.
  - JumpCrisscross 2y ago
    > potential weakness for the West dependency on TSMC worries me TSMC, in turn, outsources the entire front end of its value chain to its customers. There is nothing wrong with outsourcing. Boeing is just bad at supply chain management.
    - creato 2y ago
      I think all your other examples are healthier because each step has multiple customers. The Boeing/Spirit arrangement looks more like an accounting gimmick than actual outsourcing.

JumpCrisscross 2y ago

Spirit went public in 2006 at $26.00 per share, implying a $3.8bn market cap [1]. That’s about $40.50 ($5.9bn) today [2]. This deal is at $37.25 per share, implying a $4.7bn market cap and $8.3bn enterprise value [3]. Spirit’s shareholders got hosed; value was transferred to its lenders. [1] https://www.seattletimes.com/business/spirit-aerosystems-gains-after-its-143-billion-ipo/ https://www.seattletimes.com/business/spirit-aerosystems-gai... [2] https://www.usinflationcalculator.com/ https://www.usinflationcalculator.com/ [3] https://www.ft.com/content/c35beaff-03d3-4a55-89ff-8adce4e064ac https://www.ft.com/content/c35beaff-03d3-4a55-89ff-8adce4e06...

tankenmate 2y ago
Not particularly; a number of Spirit's business units have been running at a loss for over a decade. Another way to put it is that Spirit's shareholders got hosed by Spirit's management.
- LadyCailin 2y ago
  But the shareholders collectively outrank the company management in a public company. So it is their failure as well, and so they have to take the L on this too.
  - tankenmate 2y ago
    Indeed, I think it would be fair to say that no one covered themselves in glory in the whole debacle.
michaelt 2y ago
> Spirit’s shareholders got hosed; value was transferred to its lenders. If you're gonna invest in an aircraft builder that sometimes forgets to put the bolts in, I think only losing 8% is a pretty good deal.
- ahartmetz 2y ago
  Yep. And the low price, low quality play in that area is and should stay risky.