Boeing supplier Spirit Aero flags US$31 million hit from 737 fuselage defect
SPIRIT AeroSystems Holdings said on Wednesday (May 3) it expects a US$31 million hit to full-year gross profit from disruptions and rework related to a Boeing 737 MAX fuselage production problem, and that more costs related to the issue are anticipated.
Boeing last month said it had paused deliveries of some 737 MAXs due to a problem involving two fittings that join the aft fuselage made by Spirit to the vertical tail, which were not attached correctly.
“Additional costs are expected, including costs Boeing may assert to repair certain models of previously delivered units in their factory and warranty costs related to affected 737 units in service,” Spirit said.
“However, the company cannot reasonably estimate the remaining potential costs at this time,” it added.
Spirit projects that repair work on all affected 737 fuselages at its Wichita, Kansas-based production facility will be complete by the end of July. The company has also started to build and deliver production-conforming 737 fuselages under a revised process, it said.
Spirit CEO Tom Gentile said the company is “implementing additional protocols to reinforce our quality systems to prevent similar occurrences in the future”.
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As a result of the disruption at its factories due to the 737 manufacturing issue, Spirit logged US$12 million in unfavourable cumulative catch-up adjustments.
The company also announced US$110 million in forward loss charges on the Airbus A220, Airbus A350 and Boeing 787. Losses on the A220 amounted to about US$81 million, including US$46 million in non-recurring supply chain costs, as well as other costs related to production schedule changes.
Spirit reported a first-quarter adjusted loss per share of US$1.69, wider than analyst expectations of a US$0.30 loss per share, per Refinitiv data. It reported US$1.4 billion in revenue, missing analyst consensus of US$1.5 billion.
Cash burn was US$69 million in the first quarter, compared with a cash burn of US$298 million a year ago.
Analysts polled by Refinitiv expect a 2023 loss of 5 US cents per share on revenue of US$6.34 billion. Spirit reported a net loss of US$545.7 million in 2022, hit by supply snarls and labour shortages.
Boeing CEO Dave Calhoun last week called the 737 manufacturing defect “gnarly” and “difficult to find”, but noted that Spirit and Boeing had quickly identified affected planes and begun the rework.
Spirit expects to receive an US$180 million cash advance from Boeing in the second quarter, and Boeing said it was contributing “manufacturing and engineering resources” to Spirit after the company discovered the 737 bracket issue.
Nevertheless, the hit to profit piles more pressure on Spirit, which has been struggling to stabilise cash flows and make parts on time for widebody plane programmes due to industry-wide parts and supply shortages. REUTERS
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