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Spirit Aerosystems Holdings(SPR-N)

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Why Spirit AeroSystems Stock Is Down Big Today

Motley Fool - Thu Aug 24, 11:33AM CDT

What happened

Boeing has a fresh 737 MAX concern, and it appears one of the company's suppliers is to blame. Shares of Spirit AeroSystems (NYSE: SPR) fell more than 14% on Thursday after Boeing revealed the details of the latest setback to its most important aircraft platform.

So what

The 737 MAX is again in the spotlight for all the wrong reasons. Boeing has discovered that one of its primary suppliers improperly drilled holes in a component of the jet that helps maintain cabin pressure. This is not a safety threat, but it is a new complication that will take time, and money, to fix and could delay Boeing's long-awaited ramping up of production.

The supplier in question is Spirit AeroSystems, a one-time Boeing subsidiary that manufacturers the 737 MAX fuselage and other key components of that plane and other Boeing and Airbus models. The defect appears limited to a small number of planes, but production and deliveries will be halted while Boeing and Spirit resolve it.

Boeing said it is evaluating whether it will be able to reach its goal of delivering 400 to 450 737 jets this year.

Spirit, in a statement, said it was "aware of a quality issue" involving the plane and "has implemented changes to its manufacturing process to address this issue." The company said that based on what it knows right now, it does not expect a material impact to its deliveries this year.

Now what

The problem appears to be a minor one, but it is yet another misstep for Spirit at a time when the company can ill afford the added expense or slowed cash flow. Boeing and Airbus provided Spirit with about $280 million in cash advances in the second quarter to help support this important supplier.

Spirit has always been squeezed between its two primary customers and the countless suppliers it relies on. Some analysts have suggested Boeing should consider reacquiring Spirit to stabilize its supply chain, but the aerospace giant has dismissed such talk in the past and seems unlikely to revisit it now.

There aren't any easy answers for Spirit right now, and investors are understandably taking a subdued approach to the company's stock after this latest development.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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