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Is Boeing Going Bust?
Or Might It Be Just Busted Up?
Summary: The Boeing saga gets deeper and deeper. Last week, the company that builds 737 components - including the entire fuselages - announced that it needed cash right now to continue to be a "going concern." Funny thing is nobody in the aviation media seemed to get the gravity of the situation.
This week, Spirit Aerosystems reported that it may be in danger of not being able to be a “going concern.” Read: could go out of business. It needs substantial new cash investment to stay operating. Soon.
Now to be clear, a “going concern” statement is required SEC boilerplate when it appears that specific financial factors could align. It is not necessarily an announcement of immediate doom. But it does represent a corporation in very severe financial trouble.
Just Repeat It. Don’t Investigate. Most of the media simply described Spirit Aerosystems as a “Boeing supplier,” along with some veneer PR comments issued by the company.
This is like a reporter at the Hiroshima Daily News describing the flash they saw was just another routine 500-lb bomb.
Get this: Spirit is THE supplier to Boeing. In fact, it essentially IS Boeing, albeit an independent corporate entity.
So, one might think that a “going concern” statement about Spirit Aerosystems might be just a leeetle bit of interest. It would, if most of the aviation media had a clue. It is big news.
Until 20 years ago, when the Boeing board sold it off to “enhance shareholder value," Spirit was historically a main manufacturing plant for Boeing, not a “supplier.” We are talking about the roots of the company, from being the place where B-29s were cranked out in WW2, up to today, when it is the main – likely the only – facility making fuselages (hardly a minor part) for 737s.
While Boeing is in the glacial process of doing a $4.7 billion all-stock re-acquisition of Spirit by the middle of next year, Spirit is claiming it needs cash now to keep on operating. Guess where that will need to come from. Oh, and by the way, Boeing is also trying to build cash, too, with reported $19 billion financial offerings in the works.
So, if Spirit ends up sleeping with the fishes, and nobody jumps in to run the place, Boeing is kaput. They can’t shift that 737 work over to Fuselages-R-Us, or someplace else.
However, in the real world, with all the constituencies involved with Boeing, a Spirit factory shutdown is less than a million to one possibility. (We hope.) A deal will be arranged, whether it’s an accelerated buy-out or just more investment.
Or by some fundamental restructuring of what Boeing is today.
This will get worked out. But it will do nothing to alleviate the core problems that led to this.
Plus, because Spirit has been an independent company for the last two decades, it separately has large contracts from non-Boeing companies, including Airbus, which makes the acquisition even messier.
Not to be an alarmist, but the challenges at Boeing are not going to get solved overnight. The end of the IAM strike is just one of the challenges this company now faces.
Boeing May Not Be Able To Stand As-Is, Anymore. So, the bottom line is this: it would appear that Boeing in its traditional form simply cannot continue. A breakup of some kind, isolating the airliner and military sectors, may be in the cards.
For the USA air transportation market this is not inconsequential. It's one thing for airlines to get aircraft delivered a couple months late. It's quite another when the manufacturer has to delay them for years. Just look at the planning changes at airlines: those fleet delays will affect airline strategies.
Watch this carefully because if there is a big hiccup at Aerosystems it’s going to zap Boeing, and it's going to affect the entire USA economy.
This story is just starting.
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