Boeing said Monday it has agreed to buy a major supplier, Spirit Aerosystems, ending a nearly two-decade experiment in outsourcing the production of key components of its commercial planes, including major parts for the 737 Max and parts for the 767, 777 and 777. 787.
In buying Spirit, Boeing hopes to overcome quality problems that have plagued the supplier in recent years. While it already has significant influence over Spirit, Boeing will be able to more easily monitor and change production practices through full ownership of the business. Boeing has taken internal steps to improve quality even after a tragic incident in January that blew a panel off one of its planes on a flight.
By “reintegrating Spirit,” the company can “fully align” its manufacturing and safety systems with its workforce, Boeing’s chief executive, Dave Calhoun, said in a statement.
The deal, which was widely expected, was valued at $8.3 billion, including $4.7 billion in stock or Spirit’s debt. It must be approved by regulators and Spirit’s shareholders to complete. Boeing will also spin off parts of Spirit to its European rival Airbus as part of the transaction. Boeing said its acquisition of Spirit is expected to close by the middle of next year.
The purchase represents a strategic reversal for Boeing, which began relying more extensively on independent suppliers in the 2000s to cut costs and increase profits. Spirit was created during that outsourcing drive 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 percent of Spirit’s net revenue last year, compared to 19 percent for Airbus. Boeing offered to buy Spirit at $37.25 per share, a 30 percent At the end of February, the two companies announced that they were in talks, at a premium to Spirit’s share price.
Spirit’s quality problems led to a leadership change last fall in which Patrick Shanahan, a former Boeing executive and former senior Defense Department official, became chief executive. At Boeing, Mr. Shanahan was regarded as a skilled executive who could quickly turn around troubled programs or units. He is now the 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 since the January 5 incident in which a panel on a 737 Max 9 ruptured during an Alaska Airlines flight shortly after takeoff. A panel, called a door plug, covers the gap left by an unnecessary emergency exit.
News of the Spirit agreement came hours after reports that federal officials planned to offer Boeing a plea deal in fraud cases related to a pair of fatal 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 more serious if the panel had flown higher while passengers were walking around the cabin. The National Transportation Safety Board said the plane appeared to have left the Boeing factory without the bolts needed to secure the plug, and the company said it could not find documentation of this work. The plug was removed so workers could repair nearby for Spirit.
In response, Boeing has made several changes in recent months. He said he moved to Renton, Wash. Also at its 737 factory at Spirit, it has increased training, simplified plans and procedures, and increased inspections. Since March, it has also stopped accepting 737 bodies or fuselages from Spirit that do not fully meet Boeing’s standards. It had previously suffered some defects which could later be rectified, in the interest of continuing production.
Elizabeth Lund, a top Boeing quality executive, told reporters at the factory last week that the change has yielded significant benefits. Boeing now needs to fix significantly fewer major defects, she said, and the company is able to assemble the Max more quickly after the bodies arrive in Renton.
Boeing has also said it aims to reduce its practice of performing out-of-order production jobs, also known as travel work. Some travel work is considered necessary, but too much can disrupt the complex process of building an airplane, possibly contributing to defects and poor workmanship.
In a briefing with reporters, Ms. Lund also shared new details about how the plane involved in the January flight left the plant without fully securing the door plugs. After the plug was removed to make repairs nearby, a crew prepared to move the plane out, putting the plug back in place without its bolts, which was not the team’s responsibility, she said.
Ms. Lund’s disclosure of the new information, along with other comments at that briefing, infuriated the NTSB, which sharply reprimanded Boeing for violating rules on speaking about the ongoing investigation.
Boeing apologized to the safety board, admitting that it had “overstepped the NTSB’s role as a source of investigative information.”