➡ Boeing is considering buying Spirit Aero Systems, a company it previously spun off, which now also works for other manufacturers like Airbus. This move could help Boeing manage its production better, but it raises questions about how it would operate independently and whether it would pass government regulations. Spirit Aero Systems, which makes a significant portion of its revenue from Boeing, has faced financial struggles and workplace violations since becoming its own company. The potential purchase is controversial due to the complexities of the aviation industry and the potential impact on competition.

Boeing! So I’ve been talking to you guys and I’ve been telling you guys about Spirit Aero Systems. I think that that was the name of the company and Spirit Aero Systems recently had a few whistle blowers and some of those whistle blowers came forth and they said, hey man these planes ain’t safe. I had to leave the job. I got nagged out. I had to get laid off. I retired. I got fired or whatever and there’s been a couple of Boeing whistle blowers that actually conveniently passed away. I guess I should just believe the news on that too, right? But there was a couple of Boeing whistle blowers that passed away and it’s more of a recent whistle blower that worked at Spirit Aero Systems.

Now Spirit Aero Systems, I think I’m getting the name correct, but correct me if I’m wrong inside of the chat. Spirit Aero Systems is separate, it’s different from Spirit Airlines. Spirit Airlines is the one where all of the ghetto chicks like to argue about the fact that they bagged on way out more than it’s supposed to and they’re getting feed to death when they’re going up to jump on a plane because they think that everything is a carry-on, what does really need to be checked luggage. But Spirit Aero Systems is a supplier to Boeing that actually helps put together the planes and they got a, they’re supposed to have a rigorous quality check system that prevents certain things from happening.

Now Boeing recently had one of its doors blow off and it really blew off the lid of the company itself and I’m actually going to go into it on Stock Club on Wednesday about why I’m tripling down on the fact that you should not invest in airline companies amongst a bunch of other stuff. So if you’re not a part of the Patreon, link is in the description as well as spent to the top of the chat. But shout out to y’all and we’re going to get into it. So ladies and gentlemen, without further ado, let’s dive into this whole Boeing situation.

CNBC recently did a video on saying can Boeing fix its problems. One of the things that Boeing did was they actually bought Spirit, Spirit, the Aero Systems company, the supplier in order to take more control of what’s going on. Make sure y’all hit a like for the algorithm, subscribe to the channel and turn on your notifications. Let’s get it. Boeing has spent years trying to get back on track after the fatal MAX 8 crashes, but the company has continued to face problems with production flaws and setbacks, including a door plug flying off a MAX 9 plane in midair after it.

Could y’all imagine sitting there and you all you in the air and you’re trying to remain calm and the door blows off and you just sitting there. Man, I will lose my, actually, hopefully I will be cool. But once I got off the plane, I’m suing everybody. Took off from Portland, Oregon. Boeing stock has fallen about 30% this year. The iconic- What did I tell y’all? In the beginning of the year when we started going through Stock Club and y’all was asking me, Anton, what about this airline? Anton, what about this? What did I tell y’all? I said, absolutely, positively, never will we ever- Well, I ever personally advise you guys because somebody had asked me about Boeing and you can go go back and watch inside of the stock club.

They said, Anton, what about Boeing? Would you recommend investing in an Airbus or Boeing? And I said, absolutely. And then I did a whole live stream on the Patreon about why we don’t invest in airlines, why we don’t invest in certain hospitality stocks, why it’s bad for our portfolio, how we are to look at the eight things and we lean heavily on that in order to make a long-term investment. And I told y’all, never, ever, ever invest in Boeing, never. And then I went into Alan Mulally and how Alan Mulally had left and went from Boeing over into Ford Motor Company, in which he is largely credited with saving the company back in 2008 with the whole housing crisis and the recession.

And so if y’all want to tap into that, make sure y’all get into the Patreon. I’m telling you, it is 10 times worth the price of admission just with the money that you save, what you ain’t going to invest in. You know what I’m saying? So anyways, let’s continue on. I want to look at a little bit of this and then we’re going to deep dive into the next thing. A company that once had a great reputation for safety is losing more and more market share to rival Airbus. It’s delivered more planes and received more orders for the fifth consecutive year.

Some airlines are scaling back growth plans due to delays in production. Airlines are desperate for new planes, but not knowing how many planes that you’re going to have in your fleet by July, let’s say, is a very complicated, frustrating thing for airline executives. My message is Boeing hasn’t changed since the last time we talked. Let’s get your act together, deliver, first focus on the basics, get aircraft that are quality, at first and foremost, and safe. The pressure on Boeing has led to a major leadership shakeup, and in an effort to correct manufacturing flaws and get production back on track, it announced it’s in talks to buy Fusillage Maker Spirit Aero Systems, a company that Boeing spun off in 2005.

So much of Boeing’s manufacturing has become outsourced, and now Boeing is kind of backtracking and saying, okay, maybe that was a little bit too much. A lot of what happened during the 80s and the 90s, especially once you had the Clinton administration and then the Bush administration before that, the first Bush administration and the Clinton administration, a lot of what happened was a lot of these companies started outsourcing in order to save money. They started putting responsibility on the suppliers. American automakers, they started outsourcing it into a whole other country, right? And then you see in a spate of countries then explode and growth as a result of American companies doing business with them and then outsourcing a lot of what happened.

Well, now in the 2020s, they are realizing that that may have been a mistake, even though they saved a bunch of money then. They can’t control the quality. They can’t control the cost. They can’t control a lot of these things because they don’t have any competitors to go with. So if Spirit Aerosystems is the only supplier, and then they’re the major supplier that goes along with, because this isn’t just manufacturing a tire. This isn’t manufacturing some nuts and bolts or something that puts together. This is them manufacturing practically a huge portion of the plane.

And because they are so interdependent on this supplier, they can’t just say, hey, I want somebody else to bid for the work or somebody to do a better job. They’re so interdependent on a supplier that they have to practically buy the company in order to bring it back in house to solve for the problems that the supplier themselves obviously are having trouble solving for themselves. And so Boeing is the one that’s catching the L. Even though Spirit Aerosystems is a supplier, people automatically tie it back to Boeing because Boeing are the ones that ultimately sell the planes to whoever these airlines are or whatever in order for them to be able to fly you back and forth in the air.

Right? And so now they’re stuck between a rock and a hard place. What do you do? When you put so much pressure on a supplier that you’re interdependent on in order to be successful to fix a problem, but they have not been able to solve for it and you still have equality issues, and it’s becoming a bigger and bigger story, they’re basically saying our only hope is to spend a whole bunch of money, billions of dollars, buying out the supplier, absorbing it back in and bringing everything back in house. A lot of manufacturers, including auto manufacturers, are basically bringing everything back in house and they’re starting to stay away from outsourcing certain work.

They still are always going to outsource certain work, but they’re getting away from outsourcing certain work. That way they can control the quality issues and the cost that’s associated with this. They don’t want to, but they feel like they have to in order to be able to survive in this company. Especially when it comes to the maker of their fuselages. Spirit Aero Systems, which is not to be confused with Spirit Airlines, is one of the biggest aerostructure companies in the world, with many locations around the globe. It makes components for both commercial and military aircraft, including larger elements like fuselages and wings.

Boeing is far and away their largest customer, and Spirit provides 100% of the fuselages for the world’s second most popular aircraft, the 737. Over the past few years, there have been a series of manufacturing flaws that have come out of the Spirit Aero Systems factory on big chunks of the fuselage that are going to Boeing. It’s clearly a lot of manufacturing mishaps that are going on. Yeah. So Boeing has to bring Spirit in house to be better managed. The deal, if it closes, would be the biggest for Boeing since its merger with McDonald’s.

I have not seen this video, I’m just reacting to it in real time just like you guys. So now that becomes an issue, right? Because if Spirit as a contractor, and this is the problem with being able to buy the manufacturer that you also are independent on, because they don’t just make parts and they don’t just source for you. They also work for Airbus, they work for other manufacturers. And so if you buy this company in order to solve for the issues, how would you run it independently so that it doesn’t affect your competitors? And then would this even be able to pass government regulations and scrutiny in order for you to be able to go through with the purchase? It is a horrible industry in my opinion.

And this is just my opinion, right? I’m not telling you what to do and what not to do. Make sure you tap into the Patreon, make sure you join Stock Club on Wednesday. This is a horrible industry to depend on, invest in, in my personal opinion, and I would never personally recommend you invest in anything airline related. You know, why was Spirit? Today Spirit Aero Systems is still headquartered in Wichita. In 2023, 70% of the revenue that Spirit Aero Systems generated came from work from Boeing. Boeing says it can build one of its 737 aircraft in just nine days, but many of those parts arrive already built, like the fuselage, which gets sent via train from Kansas.

Boeing does a quick final assembly versus building the plane from start to finish in one place. After Spirit was spun off from Boeing, it began making parts for other manufacturers, including its main rival Airbus. A lot of times they spin off these companies and they create new companies. And it’s for a number of reasons. A, it makes the stock a lot more attractive with the original company. B, in a lot of instances, they spin off these companies and then they get debt. They spin off the debt also or a portion of the debt also.

And to these other companies, in order to make it a little bit more attractive for you to invest in their stock, right? It’s a lot of manufacturers, even with the automotive companies and the tech sector, where different companies are spin off from these companies and they all have different results or different reasons. But a lot of these companies are spin off or assets sold to create new companies. And one of them is they become, they still become the supplier. And so part of the agreement is that they’re still able to supply a lot of the stuff over into the original company that spined it off, right? The original name that spined it off.

Well, when that company starts to have problems, then you got to try to figure out how to buy it back because the company that it spined off can now do business with other companies as far as like, even though, you know, it’s making 70% of its profit from Boeing because that was the original company that it spined off from, it also now has the ability to source other work in order to become more profitable and not just be interdependent on you, which then make that a 22 when you try to buy the company back, right? It manufactures the wings for the Airbus 220 at its facility in Northern Ireland and parts of the A350 fuselage in North Carolina.

Boeing spun off its Wichita unit as Spirit Aero Systems to improve profitability. That puts the financial squeeze on Spirit Aero Systems to build the fuselages for the lowest possible cost. So now you start cutting corners, right? Because Spirit Aero Systems, which is now its own company, which is also trying to source more work and is also trying to reduce costs because one of the benefits of, and I’ll give you all a little bit of a lesson, right? Give you all a little bit of a stock club lesson. One of the benefits of becoming a supplier or, because a lot of y’all will say, well, man, why would they even spin off this company in the first place? Well, it improved profitability because the associated costs that come with the manufacturing is now not only passed on to the supplier, but the supplier can get it at a much, much cheaper cost, especially if it’s a non-union shop, if they can reduce the amount of wages, if they can reduce costs, it’s much easier for you to be able to drive the costs out of the manufacturing, which then allows for the original company to get it at a much better price, which improves profitability.

So I’ll give you an example. One of the things that’s happened in across the United States of America is all of these different companies and all of these different shops are unionizing, right? If you go and you work at Fort Chrysler, GM, Stellanis, whatever, we all always understood that you may go and work at a supplier and then be trying to get into Fort Chrysler and GM. Well, why? Because we know that those companies pay the best wages. And so those companies often at times, they outsource in order to save money because it wouldn’t make sense for them to have union employees as making 35, $40 an hour manufacturing these parts that makes the car much more expensive.

So we outsource it. We outsource it to Mexico, outsource it to China, outsource it to an American supplier. Why? Because they can then drive the costs out because they don’t have the same associated costs with union members. They can skirt whatever, they can go and outsource it. The only thing that the major company wants, they want their product and they want it to be able to work. They don’t care as much if you not paying the same type of wage or whatever, they want to drive the cost out, which is one of the reasons why they outsource the product, right? And so the one caveat to that or the other side to that is you then don’t have as much control over the quality control.

And if you start having problems, what you going to do? Threaten to pull the product from them, find another supplier, spend more money bringing it back in house because it’s not as attractive anymore, right? And so it’s always a catch 22. Whenever somebody is trying to give you something and they say, hey man, this is the benefits of it, ask what the cons are too. Ask what the pros are and then ask what they’re going to sell you on the pros. They really should be selling you on the cons because the pros have to outweigh the cons and it have to be significantly better in order for you to justify the spin-off of the process, right? Let’s talk about this a little bit more.

But clearly this has come with some intangible cost in terms of quality control. When Aerostructures is not a highly profitable part of the supply chain, it’s probably a five to seven percent margin business. In 2011, suppliers were paid in 30 days after they delivered their finished product. If you look at where things are today, it’s 120 days later. And that is extremely hard for the working capital. Spirit has faced some issues since the 2005 spin-off. It’s been fined by OSHA for workplace violations, including exposure to hazardous material and some deaths. And they don’t have to deal with that.

They don’t have to deal with that over at Boeing because that’s Spirit Aerosystems problem now. That ain’t Boeing’s problem, that’s Spirit Aerosystems. Spirit has also struggled financially since 2019. Its stock is down over 60 percent the last four years due to the pandemic and production halt of the 737 MAX. Spirit derives the lion’s share of its profits and revenue from these 737 fuselages. When you shut down your production line, as we did in the 737 MAX incident, it is absolutely devastating to Spirit and to Spirit suppliers. So ultimately, we’ll be deep diving more into everything that’s happening in stock club on Wednesday.

I kind of made up in my mind that I don’t necessarily want to do any work on the weekends. I mean, I have to do some work, but I don’t want to do any work on the weekends. So I’m going to try to limit the amount of work that I have to do on the weekends. And so everything that we do is hopefully, hopefully the majority of it goes during the week. And so we’re going to deep dive into that on Wednesday because that’s when we got the capacity. The link is pinned to the top of the chat of all of the details of that, as well as you being able to tap into the Patreon.

And then we’re going to go from there. [tr:trw].

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