Spirit AeroSystems and Boeing have recently entered a memorandum of agreement (MOA) with the aim of ensuring that Spirit maintains a production rate in alignment with the contractual production demands of the US OEM.
By J Prakash
Spirit, renowned for its role as a major manufacturer of large aircraft structures, has faced challenges such as cash flow issues in recent quarters, alongside quality concerns pertaining to the fuselages it produces for Boeing's 737 narrowbody jets.
According to the terms outlined in the MOA, Boeing will provide an advance payment totalling $425 million to Spirit, disbursed in three instalments. This payment is stipulated within the framework of long-term supply agreements, wherein Spirit serves as a key supplier for Boeing's 737, 747, 767, 777, and 787 commercial aircraft programs.
Spirit, in its disclosure to the US Securities and Exchange Commission, asserts that these transactions are intended to address issues related to elevated inventory levels, contract assets, and diminished operational cash flows.
Furthermore, Spirit highlights challenges related to 'lower expected' deliveries to Boeing and increased factory costs associated with maintaining production readiness, attributed to enhancements in the product quality verification process. Notably, these enhancements entail the relocation of such processes from Renton, Washington to Wichita, Kansas.
In addition, Spirit addresses Boeing's decision to discontinue the practice of allowing travelled work on 737 fuselages to its factories, alongside regulatory limitations imposed by the FAA regarding Boeing's potential production rate increments.
This agreement comes in the wake of March's disclosure, wherein Boeing indicated preliminary discussions with Spirit regarding the potential integration of the fuselage supplier back into Boeing's operations.
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