Airbus only needs the part of Spirit that relate to them, but Spirit's factories are not organised like that (e.g. the Northern Ireland complex that manufacturers the A220 wings also manufactures parts for Bombardier private jets). So it would be interesting exactly how Spirit, Boeing and Airbus split things up, and what the impact on workers and production will be.
Also, Airbus was asking to be paid for taking the parts of Spirit related to them because of their sorry state (the Northern Ireland site needs billions of investments, according to them). It's pretty funny if Boeing paid Airbus to take parts off Spirit so that Boeing can begin to try to fix their mistake from 20 years ago. Airbus are definitely making them a favour though (if they refuse, anti-competitive regulators will surely block the deal). So it's a win for Airbus, potential long term win for Boeing.
Edit: just read the FT's article on the topic, which is more detailed and covers those topics - Airbus will receive $559 million, and will take over Spirit factories in Northern Ireland, Morocco and France. Spirit will spin-off some other unrelated businesses, including other parts of the Northern Ireland facilities, which might be disastrous for the workforce there.
Article: Boeing agrees to buy Spirit AeroSystems in $4.7bn deal - https://on.ft.com/3VMqoiL via @FT
> 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.
As an example, the Northern Ireland complex will be split (something the union explicitly didn't want because it's unsuitable for it and will lead to job lesses, according to them)
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.
Spirit is a public company [1].
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.
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...
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.
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 for unwinding it.
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.
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.
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.
ARM holdings annoys me. I wish they hadn't stopped doing fab. The 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.
You can not make a modern airplane without significant outsourcing.
Neither are airplane manufacturers, but they represent companies on either side of the complex machine spectrum compared to airplanes.
I wonder how far "no outsourcing" goes. Do they make their own nuts and bolts? Even if they do, the metal must've come from a supplier (unless they also have mines). Do they make their own screens, and chips, for the flight controls? Not being cynical/sarcastic, just curious.
https://www.reuters.com/markets/deals/boeing-agrees-deal-buy...
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.
Just hazarding a cynical guess.
> 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.
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.”
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.
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.
From the 2023 Airbus annual report[1]: ...deliveries rise 11% to 735 aircraft. So in 2022 it would've been 660. Quite a bit more than 550.
[1] https://www.airbus.com/en/investors/financial-results-annual...
