Boeing’s plans to take over fuselage and airframe structures key supplier Spirit AeroSystems may have run into an additional obstacle, namely the one other key customer.

According to an exclusive report from Reuters published this week, Airbus CEO Guillaume Faury directly indicated that “it is “not unlikely” that the European plane maker takes control of two U.S. and UK plants run by Spirit AeroSystems if Boeing goes ahead with plans to buy one of the industry’s key suppliers.

Faury additionally indicated to Reuters that “it was up to Boeing to fine-tune its intentions- having changed the status quo with a surprise plan to buy back the former unit- and Airbus would have a “word to say” about where the two factories ended up.”

He further indicated that Boeing’s desire to take over this supplier was not on Airbus’s radar a few weeks earlier.

As Supply Chain Matters highlighted in our last update on the ongoing production quality crisis that has now surrounded Boeing, if the U.S. based company were to assume direct ownership of Spirit as a means to restore more direct control of internal production processes, it would have to deal with the existing supply agreements that are supporting specific Airbus aircraft production needs.

Reportedly, supply contracts involve the wing structures for the Airbus A220 aircraft family that are produced in a facility in Belfast, Ireland. The center fuselage and other structural components for the wide body Airbus 350 are produced at Spirit’s facilities in Kinston, North Carolina and in Prestwick, Scotland. Regarding the Belfast facility, multiple reports indicate that the facility has been losing money relative to operational margins.

Further, there are potentially anti-trust or other intellectual property protection concerns if Boeing were to take full control including that of industry rival Airbus’s supply needs provided by Spirit.

Notions of Dynamic Negotiations

As contract negotiation and supply management professionals are often aware, negotiations involving a backdrop of crisis often provides some leverage to the proposed acquirer, especially if the acquirer accounts for more than 70 percent of revenues. However, when the two customers are arch industry rivals and in turn make up a literal industry duopoly, dynamic is the operative context.

Industry publication Aviation Week, in its reporting of a potential Spirit AeroSystems takeover has pointed to industry speculation that the move to reacquire Spirit might  be “a ploy to satisfy the FAA or force rival Airbus-also a Spirit customer- to pony up even more money for the struggling supplier.”

That stated, Boeing CFO Brian West has retorted that the move is more about “running Spirit not as a business but not as a factory.”

There has been some reporting in investment media that Boeing may be approaching the takeover under the reasoning of the sheer amount of added investment needed to fix Spirit’s production quality processes along with adding more skilled production workers may be better leveraged in a takeover transaction.

What caught our attention in this latest Reuters report was CEO Faury’s direct hints that Airbus was in no hurry to complete this deal.  Further iterated was that Airbus’s direct relationship is with Spirit, not Boeing, and that Airbus has established change of control clauses within its Spirit supply contracts regarding change of ownership which the European producer intends to leverage.

From our lens, all of the above implies dynamic and likely extended negotiations and added time to consummate such a takeover.

Airbus has now inserted its voice and the rest of this industry’s key supplier’s will be closely observing where the dynamics end up and in what timeframe. As noted in our highlights of Q1-2024 aircraft deliveries for Boeing, the clock is ticking in terms of assuring federal regulators that Boeing has made the necessary changes in its production and quality adherence performance.

 

Bob Ferrari

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