Financially troubled-Spirit AeroSystems reached an agreement with Boeing for $350 million in advance payments for aerostructure products, which is intended to keep the Wichita manufacturer financially liquid and stable as the pending Boeing takeover proceeds.
According to Spirit AeroSystems, Boeing intends the advances to ensure “Spirit's high levels of inventory and lower operational cash flows, decrease in expected deliveries to Boeing and higher factory costs to maintain rate readiness, and lingering effects brought on by the recent strike by Boeing employees.”
Spirit Aero manufactures fuselage assemblies for the Boeing 737 MAX and 787 Dreamliner programs, and it has been the object of much scrutiny over recent years owing to a series of structural and maintenance issues on those aircraft. Spirit’s difficulty maintaining a reliable supply of 737 MAX structures was one reason that the supplier and its customer adopted a “traveled work” approach, in which semi-finished fuselage sections were delivered to Boeing and finished as other assembly work proceeded. This has been identified as one cause of structural defects and inconsistencies in the aircraft.
The recently concluded, seven-week strike at Boeing’s 737 MAX and 777 assembly operations further disrupted the supply arrangement and destabilized Spirit’s financial condition.
In its recent 3Q earnings statement Spirit warned that its cash reserves are shrinking, and its survivability is in jeopardy.
The company also is a major supplier of aerostructures to Airbus, and Reuters has reported that Spirit is finalizing a similar advance payments agreement with the European jet-builder. Neither Airbus nor Spirit acknowledged such a plan.
Over the past year Boeing has already extended an estimated $565 million in capital to stabilize Spirit AeroSystems and keep its own manufacturing program on track. In addition, Spirit reportedly has exhausted the $350-million bridge loan Boeing extended when the takeover agreement was put in place.
