A key Boeing supplier has ‘substantial doubt’ it can stay in business

A major Boeing (BA-2.56%) supplier is worried it won’t be able to continue as a business for much longer. Fuselage builder Spirit AeroSystems (SPR-5.41%) worries it won’t have enough cash to continue operations.

“Substantial doubt about the Company’s ability to continue as a going concern exists,” the company said in a release accompanying its third-quarter earnings report.

The numbers were bad — a $477 million loss on $1.5 billion in revenue — but they also point to the continuing complications of Boeing’s difficult year that was kicked off by a major Spirit AeroSystems failure.

Spirit used to be a Boeing subsidiary before the plane-maker spun Spirit out in 2005. After the split, the two companies continued working together. But as production delays mounted at Spirit, which supplies the bodies for Boeing’s cash-cow 737 Max planes, Boeing attempted to get around the problem by leaning on so-called “traveled work,” where unfinished planes would be moved further along in the production process and work would continue out of step.

Regulators believe that practice led to a piece of fuselage used to cover unused emergency exit door openings falling off a 737 Max 9 mid-flight this January. In the fallout from that incident, Boeing reacquired Spirit for $8.3 billion.

“Subject to satisfaction of the closing conditions in the Merger Agreement, the closing of the Merger is expected to occur in mid-2025,” Spirit told investors.

But the company isn’t sure it can make it that long.

“On March 2, 2024, Boeing announced they would no longer accept deliveries of product that required out of sequence assembly or incremental quality re-work,” Spirit also said. “As a result, the Company has experienced higher levels of inventory and contract assets and lower operational cash flows due to the inability to physically ship and invoice end items to Boeing in a timeframe aligned with production activities.”

And that was before a nearly two-monthlong strike at Boeing proper halted production of 737 Max planes — which translates to a major money crunch. Spirit only has $218 million in cash on hand, and it will have to wait to rebuild its coffers until Boeing can get its operations back up and running. (Furloughs have already started, and layoffs are among the “additional strategies intended to improve liquidity” that management is considering.) Though Boeing fronted Spirit $425 million in April, it’s clear that won’t be enough to stretch til the summer.

“The Company will require additional liquidity to continue its operations over the next 12 months,” Spirit said.