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Boeing in talks to buy fuselage maker Spirit AeroSystems after series of quality defects

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Aircraft fuselages destined for Boeing’s 737 Max production plant are stored at their main supplier, Spirit AeroSystems Holdings Inc, in Wichita, Kansas, United States, December 17, 2019.

Nick Oxford | Reuters

Boeing is in talks to buy Spirit AeroSystemswhich makes the fuselages for Boeing’s 737 Max planes, the companies announced Friday, as manufacturers scramble to iron out production flaws in the best-selling plane.

Shares of Spirit rose 15% on Friday, while shares of Boeing fell almost 2%. Spirit AeroSystems had a market capitalization of $3.8 billion as of Friday’s close.

In 2005, Boeing spun off its operations in Kansas and Oklahoma, which became what is now Spirit AeroSystems. About 70% of Spirit’s revenue last year came from Boeing, and about a quarter came from making parts for Boeing’s main rival, Airbus, according to a securities filing. Airbus declined to comment on the negotiations.

“We believe that the reintegration of Boeing and Spirit AeroSystems manufacturing operations would further strengthen aviation safety, improve quality and serve the interests of our customers, employees and shareholders,” Boeing said in a statement Friday. “While there is no guarantee that we will be able to reach an agreement, we are committed to finding ways to continue to improve the safety and quality of the aircraft that millions of people depend on every day.”

Spirit also confirmed the discussions.

Boeing CEO Dave Calhoun, when asked about outsourcing parts production for its planes, told CNBC in January: “Has it gone too far? Yeah… it probably has, but now It’s there and now I have to deal with it.”

Spirit struggled financially and was last profitable in 2019, before the pandemic. In October, Spirit named Pat Shanahan, who spent about three decades at Boeing, as its new interim CEO.

The negotiations take place less than two months after a section of a Boeing 737 Max 9. exploded during an Alaska Airlines flight. Federal Aviation Administration temporarily grounded all planes in January, which led to investigations on the accident and Boeing’s production lines.

It is the latest and most serious in a series of defects on the Boeing 737 Max, the company’s best-selling jet.

The door plug bolts of the Max involved in the January crash did not appear to have been secured when it left Boeing’s factory in Renton, Washington, according to a preliminary report from the National Transportation Safety Board.

Boeing revealed several production problems and quality defects on Spirit-made fuselages, including improperly drilled holes and poor spacing on some fuselage components, problems that have slowed deliveries of new planes to airlines.

The FAA, which oversees Boeing and certifies its planes, has vowed to take a closer look at the company’s production lines since the Jan. 5 crash. Earlier this week, after a meeting with Calhoun, FAA Administrator Mike Whitaker said the agency was giving the company 90 days to develop a plan to improve its quality control and safety systems.

The talks between Boeing and Spirit were reported earlier by The Wall Street Journal.

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