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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

#51

Post by sofixa »

michaelt wrote: post #34
JumpCrisscross wrote: post #29

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.c…

> Spirit’s shareholders got hosed; value was transferred to its lenders. If you're gonna invest in an aircraft builder that sometimes forgets to put the bolts in, I think only losing 8% is a pretty good deal.

To be fair to Spirit, the didn't forget to put the bolts in - that was the idiots at Boeing sidestepping procedures.

Spirit are the idiots who can't drill holes properly.

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

#52

Post by JumpCrisscross »

MrBuddyCasino wrote: post #47
JumpCrisscross wrote: post #28

Earlier quoted context omitted.

> 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 .

> The first two factors should increase Boeing’s leverage. No because there isn’t another supplier you can easily switch to. You can see this in the outrageous prices they are able to charge Boeing for parts. With chip fabs you can observe their performance in the marketplace and determine which one is good and which is bad. It makes sense to outsource to them because the know-how and capital requirements have grown…

> No because there isn’t another supplier you can easily switch to

You listed three factors. The first two, ceteris paribus, increase buyer bargaining power; the last does not. That doesn’t change because in this situation the last overpowered the first two.

By analogy, shape, size and camber contribute to a wing’s stall speed. If a wing has the wrong camber, that doesn’t negate that all three are components. (And that wing, in turn, doesn’t disprove flight.)

> Why would you outsource building a plane wing? They are not standardized but different for each plane

This is true for a lot of specialised manufacturing, e.g. TSMC and Foxconn. Varied lines is not an argument against specialisation.

> they are huge so you can’t exactly build retoolable conveyer belt production line

The first moveable assembly line built ships at the Venetian Arsenale. Size is not an argument against specialisation.

> only reason to do this is to safe on labor costs and because you don’t want the hassle of doing it yourself

Not true for Spirit. In that case, it was labor complexity and capital costs.

> primitive MBA thinking

Shanahan, Spirit’s CEO, was an engineer before MBA.

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

#53

Post by LadyCailin »

tankenmate wrote: post #32
JumpCrisscross wrote: post #29

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.c…

Not particularly; a number of Spirit's business units have been running at a loss for over a decade. Another way to put it is that Spirit's shareholders got hosed by Spirit's management.

But the shareholders collectively outrank the company management in a public company. So it is their failure as well, and so they have to take the L on this too.

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

#54

Post by sofixa »

hipadev23 wrote: post #17
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?

Uhh, it’s a public traded company, you sell the stock if you don’t have faith in the company fixing things. There are two commercial airline manufacturers in the world and a rapidly growing global population. Boeing has a 10+ year manufacturing backlog of 5600+ aircraft. Airbus has a backlog of about 7500. Both companies produce around 550 commercial units a year.

> Both companies produce around 550 commercial units a year

Boeing has significantly lower production rates nowadays - due to supply chain issues and massive incompetence that led to a near crash. For the 737 Max, their highest selling model, they're capped at 38 by the FAA, below the 45 they did last year and well below their 57 target (all figures in per month).

Their only other jet in manufacturing is the 787 which has a healthy backlog.

The 777X is delayed for years and won't see any deliveries before 2026.

Also, they have union negotiations with two important unions that have been saving money for years for a strike coming up in the next few months. And they're in the midst of a CEO change after the previous CEO was ousted by airline customers. Oh and their credit rating is on its way to a downgrade, meaning it will become even more expensive for them to get the loans they need to fix themselves.

Boeing are not going to get any better any soon. It will take years of hard effort and lots of money, which means their stock will be in the gutter for years to come.

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

#55

Post by tankenmate »

sofixa wrote: post #45
tankenmate wrote: post #31

Earlier quoted context omitted.

Spirit also manufacture carbon composite parts for the A350 in the US.

From the FT article: > As part of that, Airbus will assume the work that Spirit does for its A220 and A350 aircraft programmes at several sites around the world, including Northern Ireland, the US, France and Morocco.

Yes, the only reason I mentioned it is that the US part wasn't in your comment. Otherwise all good!

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

#56

Post by tankenmate »

LadyCailin wrote: post #53
tankenmate wrote: post #32

Earlier quoted context omitted.

Not particularly; a number of Spirit's business units have been running at a loss for over a decade. Another way to put it is that Spirit's shareholders got hosed by Spirit's management.

But the shareholders collectively outrank the company management in a public company. So it is their failure as well, and so they have to take the L on this too.

Indeed, I think it would be fair to say that no one covered themselves in glory in the whole debacle.

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

#57

Post by tankenmate »

Y_Y wrote: post #14
langsoul-com wrote: post #9

Earlier quoted context omitted.

Boeing is 64% of spirits revenue. Without Boeing, they don't exist anyway. Not to mention how Boeing's stock might be down, but they are not going to disappear at all. Just from a strategic standpoint, USA has Boeing, EU Airbus and China has the Chinese Boeing /Airbus. Major aviation companies just aren't created any more, no major government would let their strategic assets fall like that.

China's commercial aerospace manufacturer is Comac, it was founded in 2008.

And 16 years later it has only "sold" less than a dozen airframes overseas (and non delivered). It was only this year (2024) that a Comac aircraft has completed its second international flight (Vietnam).

Comac have a long long way to go yet; they have yet to tackle the certification issue let alone the delivery and operational issues. Maybe another decade?

Only then could it be considered a proper international airframer.

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

#58

Post by hipadev23 »

sofixa wrote: post #54
hipadev23 wrote: post #17

Earlier quoted context omitted.

Uhh, it’s a public traded company, you sell the stock if you don’t have faith in the company fixing things. There are two commercial airline manufacturers in the world and a rapidly growing global population. Boeing has a 10+ year manufacturing backlog of 5600+ aircraft. Airbus has a backlog of about 7500. Both companies produce around 550 commercial units a year.

> Both companies produce around 550 commercial units a year Boeing has significantly lower production rates nowadays - due to supply chain issues and massive incompetence that led to a near crash. For the 737 Max, their highest selling model, they're capped at 38 by the FAA, below the 45 they did last year and well below their 57 target (all figures in per month). Their only other jet in manufacturing is the 787 whic…

> which means their stock will be in the gutter for years to come

You're missing the point of my reply. The person was acting like accepting billions of dollars in $BA stock was an unconscionable thing. It's a highly liquid and relatively stable stock. Even if they have a 6-month lockup, the price won't likely materially change. Will Airbus continue to take market share from Boeing? Sure. But Boeing isn't going anywhere in any of our lifetimes.

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

#59

Post by cratermoon »

sofixa wrote: post #4
Jean-Papoulos wrote: post #3

FYI, Spirit was originally part of Boeing. They're walking back a strategy of outsourcing that is said to be one of the causes of their recent QC problems.

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…

> Spirit have had numerous serious quality control lapses

Boeing spun out Spirit to be able to fire all the experienced union employees and move the work to a state where they could hire non-union people, all part of cost-cutting.

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

#60

Post by sofixa »

hipadev23 wrote: post #58
sofixa wrote: post #54

Earlier quoted context omitted.

> Both companies produce around 550 commercial units a year Boeing has significantly lower production rates nowadays - due to supply chain issues and massive incompetence that led to a near crash. For the 737 Max, their highest selling model, they're capped at 38 by the FAA, below the 45 they did last year and well below their 57 target (all figures in per month). Their only other jet in manufacturing is the 787 whic…

> which means their stock will be in the gutter for years to come You're missing the point of my reply. The person was acting like accepting billions of dollars in $BA stock was an unconscionable thing. It's a highly liquid and relatively stable stock. Even if they have a 6-month lockup, the price won't likely materially change. Will Airbus continue to take market share from Boeing? Sure. But Boeing isn't going anywh…

And you're missing the bigger picture. Boeing are in a slump, and things will only get worse in the foreseeable future.

And the problem is that when the foreseeable future is over, it will be the 2030s and we'll probably have entirely new radical designs flying. Hydrogen propulsion, CFM Rise, blended wings, etc. etc. If Boeing are bleeding money and taking on expensive debt, how will they prepare for those times? If multiple of their designs are being years late, how will they have the engineering capacity to think of future designs?

Boeing the company is going nowhere. Boeing the commercial airplane maker is circling the drain in terms of how competitive they are. Their military and cargo jets, as long as the massive backlog, will keep them up for the next two decades easy. However if they can't improve themselves by next decade, they'll be forever behind.

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