Reports: Airbus might take over Spirit’s plant in France
09/18/2013 7:07 AM
08/08/2014 10:15 AM
French media are reporting that Airbus is talking with Spirit AeroSystems about the possibility of buying Spirit’s A350 XWB assembly plant in Saint-Nazaire, France, in order to get the program back on track.
The move could be a “dent to Spirit’s credibility as a major structures supplier,” RBC Capital Markets aerospace analyst Robert Stallard wrote in an investor report Friday.
Wells Fargo Securities aerospace analyst Sam Pearlstein wrote in a report that the move could be positive for Spirit, because it could reduce the company’s risk on the program.
Spirit AeroSystems spokesman Ken Evans said the company doesn’t speculate on business transactions that have not been announced.
“We don’t have anything to announce at this time,” Evans said in an e-mailed response. “Spirit is working closely with our customer to deliver on our commitments and make the A350 XWB successful. We are making good progress on the program in a close working relationship with Airbus.”
Airbus spokeswoman Mary Ann Greczyn said discussions with the company’s suppliers are private.
“All I can say at this point in time is that we are always in discussions with our suppliers in order to keep our production running smoothly – but as you would expect, those discussions are confidential,” Greczyn said in an e-mail.
French newspaper Les Echos quoted a French union leader, Francoise Vallin, on the talks. Vallin represents workers in the CFE-CGC union.
The report noted that the timing is tight on the program, and that Airbus can’t afford any missteps as the long-range commercial airliner nears its first flight this summer.
“Nothing is decided yet,” the report said.
Workers at Spirit’s 90,000-square-foot French plant assemble the composite fuselage panels and central sections of the A350 that are designed, built and shipped from Spirit’s larger facility in Kinston, N.C.
“Today’s news suggests that those efforts are not yielding the desired results for Airbus’s A350 timeline,” Stallard wrote in his report.
Airbus has been upfront about the challenges on the program.
“Production can be equally, if not more risky, than development, first flight and certification,” Stallard wrote. “Today’s report suggests Airbus is being proactive with (Spirit). … Risk will remain in the program well into the production ramp.”
Pearlstein said he understands Spirit is operating under Airbus’ production approval certificate at the French facility.
He noted that Spirit’s filing with the Securities and Exchange Commission said that the company had received additional assistance from Airbus on the program and was working to have its production certificate restored.
“If Airbus were to purchase the facility, we believe it could reduce some of Spirit’s risk on the A350 program,” Pearlstein said in the report. “We believe most of the dollar value of Spirit’s content is in the manufacturing in North Carolina and so moving the assembly facility to Airbus should not cause a large drop in its content.”
It isn’t clear if the move would lead to further changes, he said.
“But Airbus has been open about the delays coming from Spirit and it may be able to reduce the A350 schedule risk by insourcing the facility,” Pearlstein wrote. “Therefore, if not much revenue is at stake, but the risk could be reduced, it could be positive for the A350 program and Spirit.”
The change could be positive and negative for Spirit, said Teal Group analyst Richard Aboulafia.
“It depends on the terms,” Aboulafia said.
It could give Spirit more resources and allow the company to focus financial and engineering resources on other challenges, he said. “On the other hand, it cuts back on their plan to diversify their workforce portfolio.”
The action, if it occurs, is not unique.
“This is something you see more of … with Airbus and Boeing — the desire to have more control over the design and integration of their aircraft,” Aboulafia said.
“You’re starting to see a move to bring more work, particularly design work, back in-house.”
At the time Airbus outsourced the fuselage sections to Spirit, it was a weaker company than it is today, he said.
It faced troubles with its A380 airliner and strong competition from Boeing’s 787 Dreamliner, which was “destroying them on the commercial front,” Aboulafia said.
In addition, “their finances were a wreck,” he said. “They needed all the help they could get in terms of partnership. But obviously that’s no longer the case.”
Selling the plant to Airbus would affect Spirit jobs in France, Aboulafia said.
“It would probably mean Airbus personnel would take over these activities unless they were offered jobs,” he said. “I would assume they would replace them with their people.”
On the other hand, Spirit would have more resources to focus elsewhere.
“I would assume it doesn’t mean that Spirit’s role (on the A350) goes away completely,” he said.