Boeing announces plan to buy majority of subcontractor Spirit AeroSystems

Boeing announced plans to acquire Spirit AeroSystems for $4.7 billion in a stock transaction. Spirit is part of the aerospace giant’s supply chain.

Boeing, based in Arlington, Virginia, announced the acquisition in a statement early Monday. Spirit is headquartered in Wichita, Kansas.

Around the same time, European aerospace giant Airbus said it had entered into an agreement to buy “major Airbus-related activities” from Spirit.

Under the terms of the announcements, Boeing would take over most of Spirit’s operations.

Spirit builds airplanes and other critical parts for both Boeing and Airbus.

The Airbus deal will begin when Boeing’s purchase of Spirit is completed, the two US companies said.

The equity value of Boeing’s $4.7 billion acquisition comes to $37.25 per share, while the total value of the deal is about $8.3 billion, which includes Spirit’s last reported net debt, Boeing said.

Reuters news agency explains that the deal with Airbus would force Airbus to take over work at money-losing factories that supply key parts for its A220 and A350 passenger jets.

Airbus said it would be “compensated with the payment of $559 million” by Spirit “for a nominal consideration of $1.00, subject to adjustments, including based on the scope of the final transaction.”

Why is Boeing making this move?

Boeing President and CEO Dave Calhoun said in the company’s statement that, “We believe this agreement is in the best interest of the flying public, our airline customers, Spirit and Boeing employees, our shareholders and the country at large.”

Boeing previously owned Spirit, and Boeing said bringing the supplier back on board would improve the quality and safety of the planes, which have undergone increased scrutiny by regulators, Congress and airlines.

“By reintegrating Spirit, we can fully align our commercial manufacturing systems, including our Safety and Quality Management Systems, and our workforce with the same priorities, incentives and outcomes – focused on safety and quality,” said Calhoun .

Buying Spirit would change a longstanding Boeing strategy of outsourcing key work on its passenger planes. That approach has been criticized since problems at Spirit disrupted production and delivery of Boeing’s popular jetliners, including the 737 and 787.

Security concerns peaked after January 5 explosion of a panel on an Alaska 737 Max 9 at 16,000 feet over Oregon. The Federal Aviation Administration soon after announced increased oversight of Boeing and Spirit.

The plea deal for Boeing?

Separately, the Department of Justice on Sunday offered Boeing a plea deal after accusing Boeing of violating the terms of a 2021 deferred prosecution agreement which was decided after two 737 Max crashes in 2018 and 2019.

The department told Boeing it could plead guilty or go to trial, people familiar with the talks confirmed to CBS News. The deal would force the company to plead guilty to the conspiracy charge it originally faced in 2021. In exchange, Boeing would pay a fine and enter three years of probation, the people said.

The DOJ outlined the deal in a presentation to family members of the victims of the 737 Max crash earlier on Sunday before presenting it to Boeing.

News of the plea deal was first reported by Reuters.

If Boeing agrees, a judge will have to sign off on the deal.

But Paul Cassell, an attorney representing 15 of the victims’ families, told CBS News the proposal was “another plea deal” and said the families would “vigorously oppose” the deal.

Titanium parts are a concern

On another safety front, the FAA said in June that it is investigating how the titanium parts that were sold with forged quality documentation were used in the construction of Boeing and Airbus passenger aircraft in recent years.

Boeing and Airbus said planes with the falsely documented parts are safe to fly, but Boeing said it would remove the affected parts from planes that had not yet been shipped to airline customers.

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