Spirit AeroSystems' Future Faces 'Substantial Doubt'

The Boeing strike forced Spirit to burn through cash reserves.

Transcript

On Monday, Boeing's union machinists voted to accept the company's contract offer and end a strike that stretched for more than seven weeks. As the troubled plane maker gets back to business, the deal couldn't have come at a more crucial time for suppliers—and it's possible it didn't come quickly enough for one key partner.

On Tuesday, Spirit AeroSystems raised flags when it said the company faced "substantial doubt" over its ability to continue operating.

The Boeing strike forced Spirit, which makes fuselages for Boeing's 737 Max aircraft, to burn through cash reserves.

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According to a recent earnings report, Spirit ended Q3 with just $218 million cash on hand. The company previously announced a $425 million advance from Boeing, but that remains unpaid. The company also secured a $350 million bridge loan, and by the end of Q3, the entire amount had been borrowed.

Spirit is still looking for ways to improve liquidity to support operations, like additional customer advances (the ones that are paid), incremental debt financing and further restructuring.

The company has already implemented several cost-cutting measures. On October 18, Spirit announced employee furloughs, a hiring freeze and travel and overtime restrictions as a direct result of the Boeing strike. Beginning last Monday, October 28, Spirit implemented a 21-day furlough for some 700 employees working on the 767 and 777 programs due to the buildup of a significant inventory buffer.

Spirit's Q3 revenue actually improved from the same time last year, but that was due to higher production on other commercial programs and improved defense and space revenues.

Boeing is currently in the process of acquiring Spirit for $4.7 billion. Pat Shanahan, president and CEO of Spirit, says the company is still on track to close the Boeing acquisition by mid-2025. Spirit's backlog stands at approximately $48 billion, with work on the books for both Airbus and Boeing.

Still, Spirit gave no assurance that the company's plans will sufficiently improve liquidity, so other cuts could be in the mix.

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