Boeing supplier struggling with defects fires CEO
Spirit AeroSystems, losing money, deep in debt and facing repeated revelations of quality defects on parts supplied to Boeing, at the weekend abruptly fired CEO Tom Gentile.
The board of the Wichita, Kan., company appointed an interim replacement from its own ranks: former Boeing senior vice president Pat Shanahan, who led manufacturing operations and supplier management at the jetmaker before joining the Trump administration in 2017 as deputy secretary of defense.
In a statement, Shanahan expressed confidence that Spirit can get through its troubles and said he will meet with customers and suppliers to “stabilize operations and drive improved cash flow.”
Gentile’s firing reflects a crisis at Spirit that deeply affects Boeing.
Defects in major parts supplied by Spirit have repeatedly set back Boeing’s efforts to recover jet production after the steep downturns that followed first the 737 MAX crashes and then the COVID-19 pandemic.
In 2020 and 2021, multiple small but out-of-tolerance gaps at the joins in the 787 airframes were found in sections supplied by Italian and Japanese suppliers and also in the forward fuselage built by Spirit.
That led to a halt in 787 deliveries for about 19 months and a buildup of parked aircraft that cost Boeing $6.5 billion.
This year, Boeing in August discovered that MAX fuselages built by Spirit had been delivered with improperly drilled holes in the aft pressure bulkhead — the heavy metal dome capping the back end of the passenger cabin that is essential to maintaining cabin pressure.
While not an immediate safety issue, a labor intensive fix is needed on hundreds of MAX airplanes. Boeing CFO Brian West said as a result the company will sink back into the red this quarter.
In April, Boeing had found some fittings that attach the MAX’s vertical tail fin were improperly manufactured by a subcontractor to Spirit. That defect cut MAX deliveries to airlines during the peak summer season.
While repairing those jets and avoiding further quality lapses is a priority, Shanahan must also renegotiate contracts so that Spirit can survive financially.
At the end of June, before the latest 737 MAX setback, Spirit was $3.7 billion in debt with just $526 million in cash on hand.
The crisis has renewed speculation that Boeing might think again about buying Spirit and taking over its operations, a move executives ruled out at the Paris Air Show in June.
That may not even be possible given Boeing’s $38.5 billion debt load and stretched resources.
Ken Herbert, an industry financial analyst with RBC Capital Markets, told investors Monday that he expects a positive reaction to the CEO change in the stock market.
“We are uncertain on the ability of the interim CEO to change the nearterm execution challenges facing Spirit, but we do believe Gentile had lost substantial credibility with investors and even within the company and industry,” Herbert wrote. “The focus for Spirit will remain production execution, potential customer contract renegotiations, and then debt refinance.”