Boeing announced Monday that it has agreed to buy a major supplier, Spirit AeroSystems, ending a nearly two-decade experiment in outsourcing the production of key components for its commercial planes, including the fuselage of the 737 Max and parts of the 767, 777 and 787 .
By buying Spirit, Boeing hopes to curb the quality problems that have plagued the supplier in recent years. While it already has significant influence over Spirit, Boeing will be more easily able to monitor and change manufacturing practices with full ownership of the business. Boeing has taken internal steps to improve quality, too, after a distressing incident in which a panel blew off one of its planes in flight in January.
“By reintegrating Spirit,” Boeing CEO Dave Calhoun said in a statement, the company “can fully align” its production and safety systems with its workforce.
The deal, which was widely expected, 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 complete. Boeing will also spin off parts of Spirit to Airbus, its European rival, as part of the transaction. Boeing said the acquisition of Spirit is expected to close by the middle of next year.
The purchase represents a strategic shift for Boeing, which began relying more heavily on independent suppliers in the 2000s to cut costs and boost profits. Spirit was created during that outsourcing effort in 2005, when Boeing sold a division in Wichita, Kan., and operations in Oklahoma.
In addition to its work for Boeing, Spirit makes components for aerospace companies including Airbus, Bombardier, Lockheed Martin, Northrop Grumman and Rolls-Royce. Boeing accounted for 64% of Spirit’s net revenue last year, while Airbus accounted for 19%. Boeing offered to buy Spirit for $37.25 a share, a 30 percent premium over Spirit’s stock price in late February before the two companies announced they were in talks.
Spirit’s quality problems led to a leadership shakeup last fall in which Patrick Shanahan, a former Boeing executive and former senior Defense Department official, became CEO. At Boeing, Mr. Shanahan was seen as a well-rounded executive who could quickly turn around troubled programs or units. He is now a leading candidate to replace Mr. Calhoun, who plans to step down by the end of this year.
But Boeing has its own quality problems. The company has faced intense scrutiny following 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 plug, fills the gap left by an unnecessary emergency exit.
News of the Spirit deal came hours after it was reported that federal officials planned to offer Boeing a fraud settlement related to a pair of fatal crashes more than five years ago that killed 346 people.
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 when passengers might have been moving around the cabin. The National Transportation Safety Board said the plane appeared to have left a Boeing factory without the bolts needed to secure the plug, and the company said it could find no documentation for that work. The plug had been removed so Spirit workers could make repairs.
In response, Boeing has made several changes in recent months. He said he has expanded training, streamlined plans and procedures and increased inspections at the 737 plant in Renton, Wash., as well as at Spirit. Since March, it has also stopped accepting 737 bodies, or fuselages, from Spirit that do not fully meet Boeing’s standards. He had previously tolerated some defects that could be fixed later, in the interest of keeping production moving.
That change has yielded significant benefits, Elizabeth Lund, Boeing’s top quality official, told reporters at the plant last week. Significantly fewer major defects need to be fixed by Boeing now, he said, and the company is able to assemble the Max much faster once the bodies arrive in Renton.
Boeing also said it plans to reduce its practice of performing out-of-order manufacturing jobs, also known as traveling jobs. Some travel work is considered necessary, but too much work can disrupt the complex airplane manufacturing process, possibly contributing to defects and poor build quality.
At the briefing with reporters, Ms. 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 repairs nearby, a crew prepared the plane to move out by putting the plug back in place without its bolts, which was not that team’s responsibility, he said.
Ms. Lund’s disclosure of new information, along with other comments in that briefing, drew the ire of the NTSB, which sharply 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.”
