Boeing’s pursuit of enhanced production quality has led to discussions about re-vertically integrating fuselage production, potentially through acquiring Spirit AeroSystems. This strategic move is aimed at addressing longstanding issues within Boeing’s manufacturing processes and quality management.
Spirit AeroSystems, a former subsidiary of Boeing, is now an independent entity, but its history with Boeing lends credibility to the notion of reintegration. This move has sparked speculation among investors regarding the potential impact on Spirit Aero’s stock value.
Following comments from departing Boeing CEO Dave Calhoun, Spirit Aero’s shares experienced a 2% increase in early trading on Monday, reaching $35.16 per share. Calhoun emphasized the importance of addressing production and quality management issues through this potential merger, particularly focusing on optimizing workflow and nonconformance management.
Vertical integration, where a company controls all parts of its value chain, is seen as crucial for streamlining operations and ensuring quality control. Boeing’s history with Spirit AeroSystems, having previously owned it before selling it to private equity firm Onex in 2005, adds complexity to the potential merger.
Analysts hold varying perspectives on the potential outcome of the merger. While some view it favorably as a means to address Boeing’s production challenges, others remain skeptical about its effectiveness in resolving underlying issues.
Nonetheless, a deal between Boeing and Spirit AeroSystems appears likely, with potential valuations ranging from $40 to $49 per share. The average analyst price target for Spirit Aero stock is approximately $35 per share, with 50% of analysts rating the stock as Buy.
However, the situation with Spirit Aero is far from average. Its involvement in merger negotiations with a customer accounting for a significant portion of its sales adds complexity and uncertainty to the equation.
Overall, the outcome of the potential merger and its implications for both Boeing and Spirit AeroSystems remain uncertain, underscoring the importance of careful evaluation and analysis for investors navigating this dynamic situation.