Spirit AeroSystems
Fuselage assembly at Spirit AeroSystems.

Boeing Invests $100M to Fix Supply Chain Issues

Oct. 19, 2023
An agreement with Spirit AeroSystems aims at “greater collaboration to achieve improved quality and higher deliveries”, with Boeing providing financial incentives and gaining approval on the supplier’s “operational stability plan.”

Spirit AeroSystems has struck an agreement with Boeing Co. that it reported will lead to “greater collaboration to achieve improved quality and higher deliveries in the future. The Wichita-based airframe manufacturer is among Boeing’s most important suppliers, but it has struggled to keep up with production schedules and address quality-control problems.

Structural problems on fuselage sections of Boeing 737 MAX and 787 Dreamliner aircraft during the past two years, including some that have been traced to Spirit AeroSystems products, have slowed deliveries and undercut Boeing’s revenues.

The “Memorandum of Agreement” that the two have reached reportedly requires Spirit AeroSystems to implement “an operational stability plan” acceptable to Boeing.

In return for a $100 million capital investment from Boeing, Spirit must demonstrate reductions in quality defects; increase support staffing; coordinate with Boeing to buffer parts supplies, “including two weeks’ worth of finished goods for 737”; and provide detailed plans for outsourcing to any new subcontractors, according to a financial statement filed by Spirit.

The new agreement also increase Boeing’s costs for 787 structures by a total of $455 million through 2025.

In addition, the agreement restructures Spirit’s schedule for reimbursing Boeing for $180 million in advance payments already provided this year – pushing those installments out through the end of 2027.

Last month Spirit’s now-departed CEO Tom Gentile said the company would be unable to maintain delivery schedules without some additional financial return from its major customers, meaning Boeing and Airbus. He told an investors’ conference that negotiations were in progress toward that end.

It’s not known if Spirit AeroSystems will be working with Airbus on a similar agreement.

The new president and CEO, former Boeing executive Patrick M. Shanahan, said in a statement: "Our collective teams will focus on further generating supply chain performance and resiliency. This united effort to synchronize our production systems will enable greater market responsiveness and delivery assurance."

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