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Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

nytimes.com

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Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#21

Post by ggm »

JumpCrisscross wrote: post #18
ggm wrote: post #16

Outsourcing is lame, and unwinding outsourcing can cost you money to settle issues with other companies which depend on that outsource agent and have regulatory and competition concerns you have to respect. Paying Airbus to take their bit of this, is .. well it's strange but then I guess not. Boeing being Boeing, somebody got a massive KPI for making this outsource happen, then somebody else will get a massive KPI fo…

> Outsourcing is lame, and unwinding outsourcing can cost you money Apple (TSMC, Samsung), ARM (all fab), Microsoft (hardware) and NVIDIA (TSMC) each outsource critical parts of their value chains. The opposite of over-outsourcing is NBH syndrome.

Yes, but Apple has a habit of also shafting its outsources, like what they did to the UK designers back in the ipod era: as soon as chip design could make them more money they disintermediated. And now deal direct with the foundry.

ARM holdings annoys me. I wish they hadn't stopped doing fab. The potential weakness for the West dependency on TSMC worries me.

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#22

Post by JumpCrisscross »

Zafira wrote: post #13
sofixa wrote: post #4

Earlier quoted context omitted.

It is one of the causes, because Spirit have had numerous serious quality control lapses they've tried to hide (including as trivial and as serious as failing to drill holes properly). But Boeing itself has the same types of issues, so while it will give them more control, there won't be a fundamental change unless Boeing manage to fix their culture, which is highly unlikely in the short term. Especially while they'r…

It feels like Boeing divested itself of Spirit to try and avoid the responsibilities of having to manufacture various components, but the awful culture was retained at Spirit and probably made worse by the priorities of its private equity owners.

> its private equity owners

Spirit is a public company [1].

[1] https://finance.yahoo.com/quote/SPR/key-statistics/

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#23

Post by sofixa »

metabagel wrote: post #12
sofixa wrote: post #4

Earlier quoted context omitted.

It is one of the causes, because Spirit have had numerous serious quality control lapses they've tried to hide (including as trivial and as serious as failing to drill holes properly). But Boeing itself has the same types of issues, so while it will give them more control, there won't be a fundamental change unless Boeing manage to fix their culture, which is highly unlikely in the short term. Especially while they'r…

Trying to assemble planes with non-union workforce was another cause of Boeing’s production quality problems.

The people who made the dumb mistake that led to the Alaska Airlines blowout that could have been deadly quite easily were all union members. They worked around the system, removed bolts, did some work, forgot to put back bolts in. (I say they because Boeing, negligently, has no records of who did what, so the whole team of 20 people is responsible).

The main theme for Boeing in the past few decades has been lowering costs. Be it by forcing the hands of unions to lower salaries and benefits, or moving production to non-union places (787s in South Carolina), or offloading as much design and manufacturing work to subcontractors as possible, spinning off "unrelated" business such as manufacturing. Most of those were absolute disasters.

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#24

Post by JumpCrisscross »

ggm wrote: post #21
JumpCrisscross wrote: post #18

Earlier quoted context omitted.

> Outsourcing is lame, and unwinding outsourcing can cost you money Apple (TSMC, Samsung), ARM (all fab), Microsoft (hardware) and NVIDIA (TSMC) each outsource critical parts of their value chains. The opposite of over-outsourcing is NBH syndrome.

Yes, but Apple has a habit of also shafting its outsources, like what they did to the UK designers back in the ipod era: as soon as chip design could make them more money they disintermediated. And now deal direct with the foundry. ARM holdings annoys me. I wish they hadn't stopped doing fab. The potential weakness for the West dependency on TSMC worries me.

> potential weakness for the West dependency on TSMC worries me

TSMC, in turn, outsources the entire front end of its value chain to its customers.

There is nothing wrong with outsourcing. Boeing is just bad at supply chain management.

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#25

Post by JumpCrisscross »

paganel wrote: post #11
dev-jayson wrote: post #7

Earlier quoted context omitted.

I'm no expert but who in the right mind agrees to getting paid in Boeing stocks?

This is Spirit’s current CEO [1]: > Patrick Michael Shanahan (…) is a former United States federal government official who served as the acting United States Secretary of Defense in 2019. which is to say that these are companies that are, in essence, controlled by the US Government when it comes to their strategic future, so in cases like this one here the money involved is of secondary importance. [1] https://en.wik…

> which is to say that these are companies that are, in essence, controlled by the US Government

Shanahan was in government for two years under a different administration, after 31 years at Boeing, and then returned to the private sector at the helm of a publicly-traded company. Nothing about this screams “controlled by the U.S. government.”

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#26

Post by MrBuddyCasino »

JumpCrisscross wrote: post #18
ggm wrote: post #16

Outsourcing is lame, and unwinding outsourcing can cost you money to settle issues with other companies which depend on that outsource agent and have regulatory and competition concerns you have to respect. Paying Airbus to take their bit of this, is .. well it's strange but then I guess not. Boeing being Boeing, somebody got a massive KPI for making this outsource happen, then somebody else will get a massive KPI fo…

> Outsourcing is lame, and unwinding outsourcing can cost you money Apple (TSMC, Samsung), ARM (all fab), Microsoft (hardware) and NVIDIA (TSMC) each outsource critical parts of their value chains. The opposite of over-outsourcing is NBH syndrome.

TSMC‘s machines can build any kind of chip, once the masks are there, they have many customers and operate in highly competitive market where you can’t afford to fuck up and you can switch to a competitor more easily.

Spirit cannot easily build any airplane part, and it has very few customers and with very low levels of competition, so they can afford to be bad at their job because it is hard to switch suppliers.

The cases aren’t comparable.

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#27

Post by creato »

JumpCrisscross wrote: post #24
ggm wrote: post #21

Earlier quoted context omitted.

Yes, but Apple has a habit of also shafting its outsources, like what they did to the UK designers back in the ipod era: as soon as chip design could make them more money they disintermediated. And now deal direct with the foundry. ARM holdings annoys me. I wish they hadn't stopped doing fab. The potential weakness for the West dependency on TSMC worries me.

> potential weakness for the West dependency on TSMC worries me TSMC, in turn, outsources the entire front end of its value chain to its customers. There is nothing wrong with outsourcing. Boeing is just bad at supply chain management.

I think all your other examples are healthier because each step has multiple customers. The Boeing/Spirit arrangement looks more like an accounting gimmick than actual outsourcing.

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#28

Post by JumpCrisscross »

MrBuddyCasino wrote: post #26
JumpCrisscross wrote: post #18

Earlier quoted context omitted.

> Outsourcing is lame, and unwinding outsourcing can cost you money Apple (TSMC, Samsung), ARM (all fab), Microsoft (hardware) and NVIDIA (TSMC) each outsource critical parts of their value chains. The opposite of over-outsourcing is NBH syndrome.

TSMC‘s machines can build any kind of chip, once the masks are there, they have many customers and operate in highly competitive market where you can’t afford to fuck up and you can switch to a competitor more easily. Spirit cannot easily build any airplane part, and it has very few customers and with very low levels of competition, so they can afford to be bad at their job because it is hard to switch suppliers. The…

> Spirit cannot easily build any airplane part, and it has very few customers and with very low levels of competition

The first two factors should increase Boeing’s leverage.

> cases aren’t comparable

Of course they are. They’re all examples of outsourcing. The conclusion is outsourcing isn’t bad per se.

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#29

Post by JumpCrisscross »

Spirit went public in 2006 at $26.00 per share, implying a $3.8bn market cap [1]. That’s about $40.50 ($5.9bn) today [2].

This deal is at $37.25 per share, implying a $4.7bn market cap and $8.3bn enterprise value [3]. Spirit’s shareholders got hosed; value was transferred to its lenders.

[1] https://www.seattletimes.com/business/spirit-aerosystems-gai...

[2] https://www.usinflationcalculator.com/

[3] https://www.ft.com/content/c35beaff-03d3-4a55-89ff-8adce4e06...

Re: Boeing Agrees to Buy Spirit AeroSystems, a Longtime Supplier

#30

Post by constantcrying »

ggm wrote: post #16

Outsourcing is lame, and unwinding outsourcing can cost you money to settle issues with other companies which depend on that outsource agent and have regulatory and competition concerns you have to respect. Paying Airbus to take their bit of this, is .. well it's strange but then I guess not. Boeing being Boeing, somebody got a massive KPI for making this outsource happen, then somebody else will get a massive KPI fo…

>Outsourcing is lame

You can not make a modern airplane without significant outsourcing.

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