雅虎香港財經 Boeing Fraud Charge, Spirit Deal Lay Bare Scope of Crisis
(Bloomberg) -- Six months after a fuselage blowout threw Boeing Co. into crisis, the full weight of the legal and financial fallout from the near-catastrophic accident is bearing down on the embattled US planemaker.
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The US Justice Department plans to charge Boeing with criminal fraud after finding the company violated a 2021 deferred-prosecution agreement tied to two previous, fatal crashes, Bloomberg News reported late on Sunday. Just hours later, Boeing announced a plan to buy back Spirit AeroSystems Holdings Inc., a supplier it spun off two decades ago, for $4.7 billion in a bid to improve its control over manufacturing quality.
The planemaker now has a few days to make a tough legal choice: plead guilty or go to trial, neither of which are without risk. The Spirit deal, meanwhile, will saddle Boeing with more debt and tie up the manufacturer with the complex task of turning around operations at a contractor that’s suffered from poor workmanship for years — at a time when Boeing’s own facilities aren’t running smoothly.
While the intertwined developments reveal the sheer magnitude of Boeing’s current troubles, they also provide investors with a better view of the path to recovery after months of uncertainty. Boeing shares rose on Monday, with investors betting that the company will be able to tackle some of the issues that have slowed work in its factories and drained cash, a necessary step toward improving results later this year.
“If you’re an investor, you might like the fact that some of these things are being cleared up,” said Bloomberg Intelligence analyst George Ferguson. “You need a second-half recovery.”
Legal Risks
At the same time, Boeing’s legal options remain a possible pinch point. A guilty plea at the corporate level could complicate Boeing’s US government contracts and risks snarling supplies for important defense programs amid growing geopolitical tensions and wars in Ukraine and the Middle East. But going to court risks creating a legal overhang for the eventual successor to Chief Executive Officer Officer Dave Calhoun, who has said he will step down by year-end at the latest.
“Either way, this is a terrible outcome for Boeing,” Nick Cunningham, an analyst at Agency Partners in London, said of Boeing’s legal options.
Still, things could have been been worse. The Justice Department told victim families and their attorneys on Sunday that it doesn’t intend to prosecute Boeing executives and limited the fine to $243 million, in line with an earlier agreement, people familiar with the matter said.
Boeing rose 2.9% as of 12:37 p.m. in New York while Spirit gained 3.7%.
Boeing has been in turmoil since the mid-air blowout. The company’s shares are down by almost a third this year and it has warned that it’s on pace to burn through about $8 billion in cash during the first half of 2024 as it deals with a production slowdown in the aftermath of the near-catastrophe on an Alaska Airlines flight. In response to the mishap, the Federal Aviation Administration capped production of the 737 Max and required Boeing to submit a sweeping plan to address the quality issues at its factories.
In the Jan. 5 mishap, a door-shaped panel that had been assembled by Spirit and removed for repairs at Boeing exploded off the fuselage of a 737 Max 9 jet during a nearly full flight. It triggered a chain reaction at Boeing, which has seen a wholesale management shakeup, federal investigations, and scrutiny from regulators.
Spirit Deal
The Spirit acquisition marks Boeing’s biggest move yet under that spotlight to gain more control over how its planes are built. The three-way deal to divide up the supplier also provides some measure of financial relief by potentially getting some loss-making assets off its books, Ferguson said.
The US planemaker said Monday that it will pay $37.25 a share for Spirit in an all-stock deal. The total transaction value is about $8.3 billion, including Spirit’s last reported net debt. Arch-rival Airbus SE, meanwhile, gets to walk away with some parts of Spirit that make components for the European planemaker, and stands to get $559 million in compensation.
The purchase will close in the middle of next year, giving Boeing some financial wiggle room as the company seeks to protect an investment-grade credit rating hovering just one level above junk status. Ferguson said Boeing likely ended the second quarter with about $13 billion in cash. Cunningham estimates its net debt rose to $45 billion, near the high-water point of $45.8 billion two years ago.
“We believe this deal is in the best interest of the flying public, our airline customers, the employees of Spirit and Boeing, our shareholders and the country more broadly,” Calhoun said in a statement.
The Boeing transaction, once completed, will reunite assets that for decades once sat under one roof, bringing together thousands of workers and decades of shared expertise. It also brings a longtime former Boeing leader back to the company as directors hunt for a new leader: Spirit CEO Pat Shanahan was a longtime Boeing executive steeped in factory operations, known for helping turn around the 787 Dreamliner program after a troubled start.
He’s considered a potential contender to succeed Calhoun in Boeing’s top role.
The Spirit deal comes as Boeing approaches a separate, unsavory milestone: a possible settlement with the Justice Department that would potentially involve pleading guilty to criminal fraud in relation to two crashes involving the 737 Max aircraft in 2018 and 2019.
The US government plans to charge Boeing, people close to the matter said. The department concluded in May that the company had failed to meet a requirement to implement an effective compliance program to prevent and detect violations of US fraud laws. Boeing has told the DOJ that it disagreed with the finding.
The Justice Department and Boeing declined to comment.
A guilty plea to criminal charges would mark a low point in Boeing’s century-long history and a stunning development for a company that was once renowned for its cautious, straight-laced culture.
Other looming challenges leave Boeing’s crisis poised to continue even if it is able to put the wrangling over criminal charges out of the way. The company’s largest union is restive as it negotiates its first new contract in nearly 15 years, with a strike vote planned for mid-July and a potential walk-out looming in September.
“Boeing is probably a long, long way from putting their issues behind them,” said Rob Morris, the global head of consultancy at Ascend by Cirium.
--With assistance from Chris Strohm and Brooke Sutherland.
(Updates with analyst commentary from the fourth paragraph.)
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