Spirit AeroSystems’ incoming chief executive has set no timeline for completing a new long-term master contract with former corporate parent Boeing several months after the previous deal expired.
Both sides in the negotiations want to complete the deal, but there remains no pressure on finalizing terms on pricing and contract provisions for Spirit’s substantial portfolio of aircraft structures on Boeing’s commercial aircraft, says chief operating officer Tom Gentile in a meeting with journalists on 23 June at his headquarters in Wichita.
“We feel it would be in everybody’s best interest to reach a long-term framework,” says Gentile, who will succeed Larry Lawson as Spirit’s next chief executive in late July.
The previous 10-year agreement expired last year, leaving Boeing’s largest supplier and former internal partner no long-term contract on every commercial aircraft programme besides the 787, which is governed by a separate agreement. Spirit builds 70% of every 737 as well substantial structural elements of the 747, 767 and 777.
Since the last deal expired, Spirit has continued making deliveries to Boeing’s final assembly lines under interim agreements that include “satisfactory” pricing, Gentile says.
“We can operate under them indefinitely if we need be,” Gentile adds. “We want to get a deal that works for Spirit and we want to get a deal that works for Boeing.”
Negotiations to finalise the renewal have dragged on for over a year. Spirit AeroSystems traces its history to Lloyd Stearman’s biplane factory in Wichita, which Boeing acquired in 1929. The historic Plant 2 was used to build thousands of B-29 bombers in World War II and today assembles the fuselage of the 737 and major structures for Boeing’s widebody aircraft. But Boeing sold the Wichita division to a Canadian private equity investor in 2005, which re-branded the company and allowed it to pursue structural work for other aircraft.
Spirit is now part of the supply chains Airbus, Lockheed Martin/Sikorsky, Gulfstream and Northrop Grumman, but Boeing continues to claim 85% of the company’s revenues.
The pricing on the previous master agreement must be updated to accommodate for the changes in work scope, including the additional cost of new derivatives launched since 2005, including the 737 Max and 777X, Gentile says. At the same time, Boeing is applying more pressure on suppliers to cut costs and improve productivity.
“I would say the dialogue is active and constructive,” Gentile says. “Both organisations want to get to a deal done.”