Spirit AeroSystems and Boeing Sign Agreement to Address Production Issues

Spirit AeroSystems and Boeing sign deal to address supplier's cash flow issues due to 737 MAX production cap, with Boeing providing $425M in advance payments to help stabilize operations.

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Bijay Laxmi
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Spirit AeroSystems and Boeing Sign Agreement to Address Production Issues

Spirit AeroSystems and Boeing Sign Agreement to Address Production Issues

Spirit AeroSystems and Boeing have signed a memorandum of agreement to resolve the aeroparts supplier's higher levels of inventory and contract assets, as well as lower operational cash flows. The agreement aims to tackle the production issues faced by Spirit AeroSystems, a key supplier for Boeing.

Under the deal, Boeing will provide Spirit with $425 million in advance payments to help address higher inventory levels and lower cash flows, which have been impacted by the Federal Aviation Administration's (FAA) cap on 737 MAX production. The agreement also requires Spirit to maintain a production rate that supports Boeing's contractual demand. "Boeing continues to work with Spirit to improve quality, stabilize operations, and support its customers," Boeing stated.

The memorandum of agreement is intended to help manage the lower expected deliveries to Boeing due to the FAA's production cap and increased factory costs for Spirit to maintain production readiness and quality. As part of the deal, Spirit will provide Boeing with specified financial information on a weekly basis.

Why this matters: The agreement between Spirit AeroSystems and Boeing highlights the ongoing challenges faced by the aerospace industry due to production constraints and regulatory oversight. It emphasizes the importance of collaboration between manufacturers and suppliers to tackle supply chain issues and ensure the timely delivery of aircraft to customers.

The FAA's decision to limit previously planned increases in production rates for Boeing's 737 narrowbody jets has exacerbated the problems faced by Spirit, a major manufacturer of large aircraft structures. The $425 million in advance payments from Boeing will provide much-needed financial support to Spirit as it works to stabilize its operations and maintain the required production rate. The weekly sharing of financial information between the two companies will facilitate closer monitoring and coordination to address any further issues that may arise.

Key Takeaways

  • Spirit AeroSystems and Boeing signed an agreement to resolve supplier issues.
  • Boeing will provide $425M in advance payments to help address Spirit's cash flow.
  • The agreement aims to stabilize operations and maintain production rates for Boeing.
  • The FAA's 737 MAX production cap has impacted Spirit's inventory and cash flows.
  • The agreement requires weekly financial information sharing to address supply chain issues.