Sometime soon, so the reports say, aerospace giant Boeing will come to an agreement to buy Spirit AeroSystems Holdings (SPR) .
It's an important deal for Boeing (BA) because it will bring back into its corporate fold a key subcontractor for its 737 airliners and other planes.
Boeing spun off the Wichita, Kan., company in 2005, arguing that letting the business run itself would be more efficient and profitable. But Spirit has been at or near the center Boeing's quality-control problems.
Reports late last week suggested the deal was close to fruition, but no details have been available, especially on price.
Related: New Boeing whistleblower alleges company lost faulty plane parts
It's complicated by Spirit's work making fuselages for Boeing's archrival Airbus (EADSY) from a plant in Belfast, Northern Ireland. The speculation is Airbus will buy the Belfast business.
Nonetheless, the reports were good enough to push Spirit's shares up 14% on the week, allowing the stock to show a 5.6% gain on the year.
Compared with Boeing, that's terrific.
Boeing shares are down 32% in 2024, thanks to bizarre event after bizarre event just this year. The shares have fallen 60% in the past five years.
Boeing's no-good, very bad year
This year of crises started in January when a plug in an Alaska Airlines (ALK) plane blew out just after takeoff from Portland, Ore., to Ontario, Calif. Miraculously, the pilots were able to bring the plane back to Portland with everyone alive.
In the aftermath, there were disclosures the plug hadn't been secured properly, part of years of manufacturing issues.
Later, there were disclosures that records on the construction progress on Boeing's 787 Dreamliner had been falsified and fasteners incorrectly installed.
Production delays have hampered the growth plans of the global airline industry and forced schedule reductions in many markets. This affects carriers like Alaska and Southwest Airlines (LUV) , which fly only 737 planes.
Alaska, United Airlines (UAL) and others are thinking of buying planes from Airbus.
Dave Calhoun, now Boeing's CEO, said he would leave at year's end. Recent news reports suggest recruiters looking to replace Calhoun are struggling to find viable candidates.
Wall Street has lobbied for Larry Culp, CEO at General Electric Aerospace (GE) , which is a major jet engine manufacturer. Culp, who broke GE apart and unlocked billions in value for stockholders, has declined.
And all this came after two 737 Max planes crashed in 2018 and 2019, killing all aboard. Every single 737 Max was grounded for 20 months. One CEO resigned, along with most board members.
Optimists believe Boeing will get things right, eventually. It does have a backlog valued at $529 billion, including its defense business.
The commercial-plane backlog is more than 5,600 planes valued at $448 billion.
But the turnaround may take time, even if the deal with Spirit happens.
More on Boeing
- Can Boeing Stabilize Here or Is There More Risk?
- Boeing sinks deeper into hot water over its 737 Max mishaps
- Boeing whistleblower says he received ‘physical threats’ over safety concerns
Should one buy the stock?
Only if you expect to wait a long while. Buying Boeing is an act of faith because of its problems and because the company is not paying a dividend now. The losses it's reported since 2019 have topped $32 billion.
The four big reasons that require any buyer of Boeing shares to be patient:
The numbers are daunting. The company is expected to lose $1.09 in the second quarter, wider than the loss of 82 cents a share a year earlier. That's the average estimate among 22 analysts. The low estimate is $2.19. Revenue is estimated at $18 billion, down from $19.7 billion a year earlier.
The operational problems throughout Boeing are complex and not completely known. Case in point: Boeing's Starliner shuttle vehicle is stuck at the International Space Station while NASA and Boeing try to understand leaks in the vehicle's propulsion system.
The leadership is in crisis. Calhoun is leaving in six months, and there's still no successor named. A civil war is raging between the financial officers who have controlled the company since 1997 and most everyone else. The money guys want to make Wall Street happy and get the stock price back up to $440, the top price in 2019. Everyone else wants Boeing to make great aircraft.
Criminal liability from the crashes is still open. Families of victims in the 2018 and 2019 crashes want criminal charges brought. A New York Times report had said the Justice Department wasn't going to file criminal charges. That's been walked back so the matter is still under review.
Why should anyone care about the Boeing situation
The short answer is this: For years, Boeing was the single-largest U.S. exporter and the world's largest commercial airplane maker. It has lost the latter title to Airbus, and China has ambitions to offer a competitor to the 737, as does Brazil's Embraer.
Boeing's continued health is important to the domestic economy and a matter of national security. Boeing employs nearly 170,000 people directly. Spirit has another 18,000 workers. Thousands of subcontractors and their workers in the U.S. and elsewhere depend on Boeing.
Boeing invented modern jet travel in the 1950s with the 707. It was a key manufacturer of bombers in World War II and, of course, the iconic B-52.
It has history that would be impossible to replace.
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