Boeing said on Monday it had agreed to buy its main supplier, Spirit AeroSystems, ending a nearly two-decade experiment in outsourcing the production of key components of commercial planes, including the fuselage of the 737 Max and parts of the 767, 777 and 787.
In buying Spirit, Boeing hopes to overcome the quality problems that have plagued the supplier in recent years. Although it already has significant influence over Spirit, Boeing will be able to more easily monitor and change production practices by owning the business directly. Boeing has taken internal measures to improve quality, as well, after the harrowing incident in which a panel blew out of one of the planes on the plane in January.
“By reintegrating Spirit,” Boeing chief executive Dave Calhoun said in a statement, the company was “able to align” its production and safety systems with its workforce.
The deal, which was widely expected, valued the stock at $4.7 billion or $8.3 billion including Spirit’s debt. It must be approved by regulators and Spirit shareholders in order to be completed. Boeing will also spin off parts of Spirit to Airbus, its European rival, as part of the transaction. Boeing says the Spirit acquisition is expected to close by the middle of next year.
The purchase represents a strategic reversal for Boeing, which began to rely more extensively on its suppliers in the 2000s to cut costs and raise profits. Spirit was created during the outsourcing drive in 2005, when Boeing sold its 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, while Airbus accounted for 19 percent. Boeing offered to buy Spirit for $37.25 a share, a 30 percent premium to Spirit’s stock price in late February before the two companies announced they were in talks.
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 considered an executive who could quickly turn around a program or unit in trouble. He is now the leading candidate to replace Mr. Calhoun, who plans to step down later this year.
But Boeing has its own quality problems. The company has faced intense scrutiny since the January 5 incident in which the panel on the 737 Max 9 blew out of the Alaska Airlines plane shortly after takeoff. The panel, known as the door plug, covers the gap left by the unneeded emergency exit.
The news of Spirit’s agreement came hours after reports that federal officials planned to grant Boeing a plea agreement in a fraud case 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 severe if the panel had been blown off at a higher altitude when passengers were able to move around the cabin. The National Transportation Safety Board said the plane appeared to have left Boeing’s factory without the bolts needed to secure the plug, and the company could find no documentation of the work. The plug has been removed so workers for Spirit can make repairs at the shop.
In response, Boeing has made several changes in recent months. It said it has expanded training, simplified plans and processes and increased oversight at its 737 factories in Renton, Wash., as well as in Roh. Since March, they have also stopped receiving 737 bodies, or fuselages, from Spirit that do not meet Boeing’s standards. It has previously allowed some defects that can be corrected later, in the interest of keeping the production moving.
The changes have resulted in significant gains, Elizabeth Lund, Boeing’s top quality executive, told reporters at the plant last week. Fewer major defects need to be fixed by Boeing now, he said, and the company can assemble the Max more quickly if a body arrives in Renton.
Boeing also said it aims to reduce the practice of performing out-of-order manufacturing tasks, also known as traveling work. Some traveling work is considered necessary, but too much can interfere with the complex aircraft manufacturing process, possibly causing 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 factory without a door plug to secure it. After the plug was removed for nearby repairs, a crew prepared to move the plane outside, putting the plug in place without the bolts, which was not the team’s responsibility, he said.
Mrs. Lund’s disclosure of new information, along with other comments in the briefing, elicited the anger of the NTSB, which strongly rebuked Boeing for violating the rules of speaking about the ongoing investigation.
Boeing apologized to the safety board, admitting that it “exceeded the NTSB’s role as a source of investigative information.”