Boeing said Monday it had agreed to acquire a major supplier, Spirit AeroSystems, ending a nearly two-decade experiment with outsourcing the production of key parts of its commercial aircraft, including the body of the 737 Max and parts of the 767, 777 and 787.
With the purchase of Spirit, Boeing hopes to put an end to the quality problems that the supplier has suffered from in recent years. Although it already has significant influence over Spirit, Boeing will be able to more easily control and change production practices by taking full ownership of the company. Boeing has also taken steps internally to improve quality, following a harrowing incident in which a panel blew out of one of its planes during a 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 widely expected deal was valued at $4.7 billion in stock, or $8.3 billion including Spirit’s debt. It must be approved by regulators and Spirit’s shareholders before it can be completed. Boeing also will spin off parts of Spirit to Airbus, its European rival, as part of the transaction. Boeing said the Spirit acquisition is expected to close by the middle of next year.
The purchase represents a strategic shift for Boeing, which in the 2000s increasingly relied on independent suppliers to cut costs and boost profits. Spirit was created during that outsourcing drive in 2005, when Boeing sold a division in Wichita, Kansas, and operations in Oklahoma.
In addition to its work for Boeing, Spirit makes parts for aerospace companies including 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 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, with Patrick Shanahan, a former Boeing executive and former senior Defense Department official, becoming CEO. At Boeing, Mr. Shanahan was seen as a skilled 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 at the end of the year.
But Boeing has its own quality problems. The company has faced intense criticism since the Jan. 5 incident in which a panel on a 737 Max 9 exploded shortly after takeoff during an Alaska Airlines flight. The panel, also called a door plug, covers the opening created by an unnecessary emergency exit.
News of the Spirit deal came hours after a report emerged that federal officials were seeking to offer Boeing a settlement in a fraud case tied to two deadly crashes more than five years ago that killed 346 people.
While no serious injuries were reported in the January episode, the consequences could have been far more serious if the panel had blown out at higher altitudes while passengers were possibly moving about the cabin. The National Transportation Safety Board has said the plane appears to have left a Boeing factory without the bolts needed to secure the plug, and the company has said it could find no documentation of that work. The plug had been removed so Spirit workers could make repairs nearby.
In response, Boeing has made several changes in recent months. The company said it has expanded training, simplified plans and processes and increased inspections at its 737 factory in Renton, Washington, as well as at Spirit. Since March, it has also stopped accepting Spirit 737 fuselages that do not fully meet Boeing’s standards. Previously, the company had tolerated some defects that could be resolved later to keep production running.
That change has yielded significant benefits, Elizabeth Lund, a top Boeing quality manager, told reporters at the plant last week. Boeing now needs to repair significantly fewer major defects, she said, and the company can assemble the Max much more quickly once the bodies arrive in Renton.
Boeing has also said it is working to reduce the practice of performing production tasks out of sequence, also known as traveled work. Some traveled work is considered necessary, but too much can disrupt the intricate process of making airplanes, potentially contributing to defects and poor workmanship.
In 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 removing the plug to make repairs nearby, a crew prepared the plane to be moved outside, putting the plug back in place without bolts, which was not the team’s responsibility, she said .
Ms. Lund’s disclosure of new information, along with other comments in that briefing, angered the NTSB, which sharply reprimanded Boeing for violating rules about speaking about an ongoing investigation.
Boeing apologized to the safety board and acknowledged that it had “overstepped the NTSB’s role as a source of investigative information.”
