When Boeing ramps up production of the 737 narrowbody airliner in Renton, Washington, there are repercussions in Wichita, Kansas. There, in America’s heartland, Spirit AeroSystems—a former Boeing division and now the manufacturer’s biggest supplier—must adjust its operations accordingly to meet the rate increase.
In fact, Spirit (Chalet C18) is essential to any Boeing ramp up—the aerostructures company builds 70 percent of the airframe of the 737 and its military derivative, the P-8A Poseidon. Each evening it ships two 737 fuselages by rail from its sprawling Wichita facility to Renton in the Pacific Northwest, the start of a 10-day journey; and a tradition best observed from Savute’s Italian Ristorante on North Broadway St., the locals say.
Though it’s not outwardly evident, Spirit also builds the forward fuselages, engine pylon and wing sections of the Boeing 787, 767 and 747 widebodies. Since spinning off from Boeing in 2005, the company has acquired contracts for major content on the Airbus A350 XWB (composite center fuselage) and wing-structure packages on the A320 narrowbody and A380 superjumbo. It is supplying engine pylons for the Bombardier C Series and Mitsubishi MRJ regional jets and the nacelle and thrust reversers of the Rolls-Royce BR725 business-jet engine.
“We’re not an original equipment manufacturer, so our name doesn’t go on the products we build,” explained outgoing president and CEO Larry Lawson in a video. “People a lot of times confuse us with other companies. Of course, if they were at any airport and they were to look out the window, they would see Spirit products.”
Now the ultimate responsibility for matching rate increases associated with the re-engined 737 Max, the 787 Dreamliner and the Airbus A320 and A350XWB, falls to Lawson’s successor—Tom Gentile—who joined Spirit in April as executive vice president and COO after serving as president and COO of GE Capital. Last month, in an announcement that caught analysts by surprise, Spirit revealed that Lawson is retiring after three years at the helm and that Gentile, 51, will replace him, effective July 31.
During a roundtable meeting with invited reporters in late June, Gentile said that honoring the company’s delivery commitments across all programs is first among his marching orders from the board of directors. “We have to meet the rate increases and the quality and delivery expectations,” he said. “That’s the first priority—meet the current commitments.”
Spirit is “rate ready” to support Boeing’s plan to increase 737 production from 42 to 47 aircraft per month in 2017, Gentile said. The company is supporting the 787 ramp-up this year from 10 aircraft per month to 12. With Airbus, Spirit is rate-ready to supply wing parts for 48 A320s per month inceasing to 52; on the A350XWB it can support eight airplanes per month, increasing to 10 and 12 in the future.
“They’re all going up in rate, so we just have to meet those rate requirements,” Gentile said. “If Boeing does go from 42 to 47 [on the 737] then 52 and 57, that’s a significant increase. We have embedded growth; we need to make sure we invest in that and drive our core business. If we can invest in facilities, automation, plant equipment to improve our productivity or move work to places where it’s more competitive—anything we can do along those lines will improve our margins as we grow.”
Making rate
Not surprisingly, “making rate” was a recurring theme among executives who led tours of Spirit’s cavernous, historic facilities. Founded by Stearman Aircraft in 1927, the Wichita site was later used by Boeing to build the B-29, B-47 and B-52 bombers. Spirit’s buildings may be old, but within their walls the company has brought to bear robotics and other state-of-the-art equipment to keep pace with modern aerospace.
In Plant 2, a half-mile-long factory where 737 fuselages are constructed, Spirit has deployed 30 automated fastening machines to join interior panels and structural skins—equipment that supports “rate preparedness” for Boeing’s production ramp-up to 47 narrowbodies, said Jim Hans, director of 737 automation and final assembly. “Each section shell has an automated component; that is why we remain as competitive and effective as we are,” he asserted.
In another building that was substantially damaged by a tornado in April 2012 but returned to service within a week, Spirit was churning out 737 thrust reversers at four halves per airplane and readying Kuka robots to perforate the skin panels for acoustic attenuation. “We will use these as needed for rate,” said M.L. Anderson, director of operations for nacelles and composites.
Spirit’s composite fuselage facility housed a massive Electroimpact automated fiber placement machine, which moves on a track to apply resin-impregnated carbon fiber to build up 787 fuselage section 41, the composite nose and forward fuselage of the Dreamliner. Spirit also “stuffs” the fuselage section with the necessary electronics and wiring harnesses, shipping seven finished cockpits per month to Boeing’s Dreamliner assembly line in Everett, Washington, and five to the 787 line in North Charleston, South Carolina.
The company’s Airbus work packages are concentrated at facilities it acquired after the Boeing spinoff. Spirit produces the Section 15 composite center fuselage of the A350XWB at a plant it opened in July 2010 in Kinston, North Carolina; it then ships the section to its facility in Saint-Nazaire, France, for assembly prior to delivery to Airbus in Toulouse. Spirit also produces A350 front spar segments in Kinston and ships them to its facility in Prestwick, Scotland, for assembly into the aircraft’s fixed leading edge prior to delivery to Airbus. The Prestwick location, called Spirit AeroSystems Europe, produces the leading and trailing edges of A320 wings.
Master contract
Another of Gentile’s marching orders from the board is to close master contract agreements with Boeing as well as Airbus. When Canadian private equity firm Onex acquired Boeing’s Wichita division and operations in Tulsa and McAlester, Oklahoma, in July 2005 for $1.2 billion—renaming them Spirit AeroSystems—the transaction included a 10-year “sustaining agreement” to guide the ongoing working relationship with Boeing, Gentile said. (The 787 program was a separate agreement.) Boeing programs provide 85 percent of Spirit’s annual revenue of $6.7 billion, and concluding a new master agreement—already a year late—is important for both companies.
“Both companies would like to get a deal done so that we have a permanent framework under which to operate going forward,” Gentile said. “From our standpoint, we would like to get a deal, but we have interim arrangements in place that establish pricing for the 737 and the Max and also the 787 and all of its various derivatives. Those interim arrangements have satisfactory economics.”
Though Spirit could operate under those agreements “indefinitely” if necssary, “we’d prefer to get a permanent arrangement,” he added. “Boeing is our biggest customer; their success is our success. We want to do everything we can to make them more competitive.”
Gentile is also charged with driving Spirit’s “growth agenda,” which could involve both organic growth within the company and acquisitions of other aerostructures companies, suppliers or aftermarket businesses, he said. A first-tier supplier to the commercial aerospace industry, Spirit is also involved in the military market—it provisions Boeing 737 and 767 structures for assembly of the P-8A Poseidon maritime patrol aircraft and KC-46A Pegasus aerial refueling tanker, respectively. The company is supplying the forward fuselage section of the U.S. Marine Corps’ new CH-53K King Stallion heavy helicopter and it produced the fuselage of Bell Helicopter’s V-280 Valor tiltrotor, which will compete in the U.S. Army’s joint multi-role technology demonstration effort.
But the biggest military prize of all could be the U.S. Air Force’s coming B-21 long-range strike bomber. In March, Spirit was among suppliers the Pentagon identified as participating on the bomber team with Northrop Grumman, which won the potentially $80 billion program over Boeing and Lockheed Martin. As with all companies involved in the highly secret program, Spirit executives were guarded in discussing the B-21. But they did speak of increasing the company’s overall military business from 3-to-5 percent of annual revenue to potentially 15 percent in the future—growth to which the B-21 will contribute.
Gentile said that he still didn’t have the necessary security clearance to know details of the B-21 program. “But it’s a significant program, and it will provide a strong foundation,” he said. “I think defense and military will be a material portion of Spirit’s activities in the future.”