A year into the Boeing 737 MAX crisis and Spirit AeroSystems is feeling some pain. With production halted on the airframe at the beginning of 2020, the company has initiated layoffs of some 3,200 employees, 2,800 in Wichita directly related to the 737 and 400 in Oklahoma. All told this accounts for 28 percent of its workforce.
In 2019, Spirit AeroSystems’ sales rose almost 9 percent, to $7.7 billion, from $7.2 billion in 2018. The company posted net income of $530 million for the year, compared with $617 million for 2018. Backlog fell to $42.5 billion for the year, compared to $48.4 billion at the end of 2018.
While production of the 737 MAX is expected to restart by mid-2020, the workforce and production rates will rebound slowly. Once this occurs, Boeing will begin the process of slowly restarting manufacturing and assembly. According to corporate officials, production will not reach the goal of 57 units per month for at least a couple of years. For its part, Spirit AeroSystems currently does not expect to be back at the old production rate of 52 aircraft per month until late 2022.
With trouble at home, Spirit AeroSystems is continuing to diversify away from its Boeing-centric operations with the addition of Airbus programs. The company has facilities in the U.K. and France that support many Airbus programs.
As part of this effort, Spirit has moved to acquire European component manufacturer Asco. Specifically, the purchase expands Spirit’s Airbus content on A320 and A350 wings, adds new defense content on the F-35, and broadens the company’s overall fabrication operations.
After hitting an undisclosed hiccup with the European Union in late 2018, Spirit resubmitted its application and subsequently received EU approval in early 2019. It is a solid play for the company that instantly opens up complementary manufacturing capability.
This purchase hit another bump when Asco was hit with a cyber attack in June. As a result of ongoing issues related to the attack, Spirit cut its offer by $184 million to $420 million. The deal is now expected to close in early 2020.
Further, following Airbus take over the Bombardier CSeries, rebranded as the A220, Spirit is looking to increase its presence on the program. The company made a decisive move in this regard with the purchase of several Bombardier assets, most notably the Belfast-based A220 wing facility. In addition, Spirit will acquire Bombardier’s aerostructures activities and aftermarket services operations in Casablanca, Morocco, and its aerostructures maintenance, repair and overhaul (MRO) facility in Dallas, Texas, USA.
As Airbus looks to cut costs on A220 production, Spirit sees an opportunity to bundle more work shares into cost-effective packages for the OEM. The company makes engine pylons for the A220 and can now add wing work to its packages.
In addition, the purchase brings in more business and regional aerostructure production for the company. The acquired businesses produce composite and metallic wing components, nacelles, fuselages and tail assemblies, along with high-value mechanical assemblies made out of aluminum, titanium, and steel. Specific programs include Bombardier’s 7500 business jet as well as components for a variety of aircraft including Global 5000s and 6000s, Challenger business jets, Learjets, A320s, and A320neos.
Longer term, the company would like to add more defense contracting to its portfolio. Defense accounts for about 3 percent of Spirit’s annual sales, and the company would like to see the figure grow to around 20 percent. Already the firm has been identified as a supplier for Northrop Grumman’s new B-21 bomber program.
To speed this effort, the company added Fiber Materials, Inc (FMI) to its portfolio in early 2020. FMI is a specialty composites producer primarily for the defense industry. FMI’s products are currently on the Trident D5, Standard Missile, PAC 3, and THAAD and are part of NASA programs such as Stardust, Mars Curiosity, Orion and Mars 2020. With growing interest in hypersonic missiles, FMI will be well-positioned to provide the needed high-temperature materials for such systems.
Despite the slings and arrows of fortune, Spirit AeroSystems is moving in the right direction. While its current strategy appears strong, the recent COVID-19 outbreak will put the brakes on growth in 2020. At this writing, it is still too early to tell how this pandemic will play out among manufacturers, but the Trump administration has indicated strong support for the aerospace industry to see it through the crisis.