Report: Boeing may reacquire Spirit at higher price despite hating optics

Amid safety scandals involving “many loose bolts” and widespread problems with Boeing’s 737 Max 9s, Boeing is apparently considering buying back Spirit AeroSystems, the key supplier behind some of Boeing’s current manufacturing problems, sources told The Wall Street Journal.

Spirit was initially spun out from Boeing Commercial Airplanes in 2005, and Boeing had planned to keep it that way. Last year, Boeing CEO Dave Calhoun sought to dispel rumors that Boeing might reacquire Spirit as federal regulators launched investigations into both companies. But now Calhoun appears to be “softening that stance,” the WSJ reported.

According to the WSJ’s sources, no deal has formed yet, but Spirit has initiated talks with Boeing and “hired bankers to explore strategic options.” Sources also confirmed that Spirit is weighing whether to sell its operations in Ireland, which manufactures parts for Boeing rival Airbus.

Perhaps paving the way for these talks, Spirit replaced its CEO last fall with a former Boeing executive, Patrick Shanahan. In a press release noting that Spirit relies “on Boeing for a significant portion of our revenues,” Spirit touted Shanahan as a “seasoned executive” with 31 years at Boeing, and Shanahan promised to “stabilize” Spirit’s operations.

If Boeing reacquired Spirit, it might help reduce backlash over Boeing outsourcing manufacturing of its planes, but it likely wouldn’t help Boeing escape the ongoing scrutiny. While the WSJ reported that “Spirit parts frequently arrive” at the Boeing factory “with defects,” it was “a snafu at Boeing’s factory” that led Alaska Airlines to ground 65 Boeing aircraft over safety concerns after a mid-aircraft door detached mid-flight, endangering passengers and crew.

Sources later revealed that it was Boeing employees who failed to put bolts back in when they reinstalled a door plug, reportedly causing the malfunction that forced Alaska Airlines to make an emergency landing. As a result, Boeing withdrew from a safety exemption that it had requested “to prematurely allow the 737 Max 7 to enter commercial service.” At that time, US Sen. Tammy Duckworth (D-Ill.) accused Boeing of a “bold-face attempt to put profits over the safety of the flying public.”

Purchasing Spirit would appear to be a last resort for Boeing, the WSJ reported, noting that so far, “Boeing has done everything short of acquiring Spirit in an effort to gain control over the supplier.”

But Reuters confirmed the WSJ’s report with an industry source, so it seems like perhaps Boeing increasingly feels it has no other options left despite working closely with Shanahan for the past few months to keep Spirit’s troubles from impacting Boeing’s bottom line. One industry source told Reuters that in the time since Boeing spun off Spirit, “the optics of buying at a higher price were among the factors that discouraged such a move.”

For Spirit, which attributes nearly two-thirds of its revenues to Boeing, the WSJ reported, being brought back into the Boeing fold could be the only way to survive these turbulent times. Currently valued at about $3.3 billion, Spirit has struggled for months to shore up a commercial agreement with Airbus and notably failed to stabilize after receiving a “$100 million cash infusion from Boeing” last year, the WSJ reported.

But for Boeing, the obvious downside of the purchase would be taking on Spirit’s mess at the same time Boeing is trying to clean up its own image.

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