Whichever way you look at it, Boeing is in a shit-load of trouble right now especially with its 737MAX programme which is its primary bread and butter product in the Civilian Marketplace. Will buying back the Wichita help Boeing regain control over the narrative?
The never ending saga that began with the backlash over whistle-blowers at both at Boeing and contractor Spirit followed by 2 back to back crashes which claimed over 346 lives which in turn led to an inexpensive worldwide grounding of their 737MAX fleet. The latest in the never ending saga is the incident on Jan 5, when a MAX9 variant of the 737 operated by Alaska Airlines experienced an inflight loss of pressure following loss of a door plug specific to the lower density MAX9s. This incident was found to have been caused by misplaced bolts holding the plug door assembly in locked position.
While this specific issue has now been blamed on inspection staff working at the Boeing's Renton plant, a number of issues with 737MAX production quality Control were found to have been caused by poor Quality Control and other issues with the Contractor Spirit Aerosystems which manufactures the fuselage of the 737NG and 737MAX series at the Wichita Plant. Since 2012, there have been calls for Boeing to address the issues at Spirit and especially at their Wichita factory. Ironically, the Wichita factory was originally owned by Boeing. It was sold off to contractor Spirit in 2005 as part of a cost cutting and book-fixing effort by Boeing managers. Spirit has been running the Wichita plant as a contractor since. All the problems in production and quality control have surfaced AFTER the 2005 date.
Boeing's Wichita factory began life as part of the Stearman Aircraft company. The first aircraft built here in 1926/7 was the C-3B - a 3 seat mail aircraft used by Charles Lindbergh to survey routes for TWA. It became part of UTA/Boeing in 1929 and has since gone on to produce many iconic products in the Boeing stable including B-29s, B-47s, B-52s, KC-135 and so on.
In the 2005 period, the Wichita plant and supporting business was sold to a contractor Spirit Aerosystems. The reasoning behind the decision to sell this part of the operations is known - cut costs and improve numbers ruthlessly by removing "non-core" parts of your business from your Balance Sheet and onto the contractors. At some level, it makes sense - we learnt this in B-school na? Remember *RONA* - Return on Net Assets and all that jhing-pang from B-School?
What has happened since is well known. It has gone very, very badly for Boeing! Only someone in total denial would say otherwise! The 737MAX and the 77X programmes are both in serious trouble, the 787 programme has also been faced with numerous issues most of which have also traced back to contractors including Spirit. Has the sub-contracting to cut costs approach which came with Mcdonnel Douglas takeover gone too far and damaged Boeing's ability to compete? That would seem to be the case!
The 737MAX programme is the major generator of cash at Boeing with over 40 deliveries/month at its peak. Fixing the issues with this programme will give Boeing the resources to get the other programmes like 77X and 787 back on track.
IMO, One way for Boeing to get back in the game is to buy back the Wichita factory from Spirit and take full control of the 737MAX production back in-house. They will have a better chance at making required changes at a inhouse company than at a contractor. Clearly strategies like withholding invoice payments etc have not worked!
What do you think people? Do you think Boeing should buy back Wichita Factory Complex from Spirit and bring the 737MAX programme inhouse? Do comment your thoughts below.
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