Boeing in discussions to buy supplier Spirit AeroSystems

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Boeing is in talks to buy its struggling former subsidiary Spirit AeroSystems as both companies try to solve persistent quality problems and contain costs related to 737 MAX production, an industry source familiar with the matter said on Friday.

A merger would bring Spirit back under the umbrella of Boeing, which spun it off in 2005 and in recent years has struggled with cost pressures and problems that have slowed aircraft deliveries.

Spirit has hired bankers to explore strategic options and has had preliminary discussions with Boeing, the Journal reported earlier on Friday, citing people familiar with the matter.

Boeing had previously considered the prospect of buying Spirit AeroSystems back since divesting it, but the optics of buying at a higher price were among the factors that discouraged such a move, according to a second industry source.

FAA: Boeing must develop comprehensive quality plan in 90 days

Both Boeing and Spirit have been under fire since a Jan. 5 incident when a door plug blew off a 737 MAX plane in mid-flight.

Bringing Spirit back into the fold could address some of those quality issues as it would give Boeing more control over manufacturing.

Such a move would also help Boeing lower Spirit production costs through economies of scale, the second industry source said.

“Clearly Spirit is in a world of pain at the moment, and the ongoing regulatory risk on its largest program – the 737 – makes things worse,” said Vertical Research Partners analyst Robert Stallard.

“For Boeing, this does give them the opportunity to bring Spirit in-house and fix its problems, but Boeing of course has its own issues and has hardly covered itself with glory when it comes to execution of late.”

Spirit, one of the industry’s major manufacturers of large aircraft structures, has struggled with cash flow problems over the past few quarters and quality issues surrounding the fuselages it makes for Boeing’s 737 narrowbody jets.

Spirit is also exploring selling operations in Ireland that make parts for Airbus.

With information from Reuters