Boeing’s reverse deal thrust augurs small tailwind

Stunt flying. Boeing is changing one setting that should help put it on a better course. Nearly two decades after jettisoning supplier Spirit AeroSystems  in an attempt to engineer some financial uplift, the embattled 737 MAX manufacturer has initiated talks to buy back its former subsidiary. The strategic reversal from boss Dave Calhoun augurs some helpful tailwinds.

In 2005, Boeing decided to focus primarily on designing planes and finalizing assembly of their hundreds of thousands of parts. The company itself knew there were risks to outsourcing steps in its process. An employee-written white paper noted that Boeing’s performance could “never exceed the capabilities of the least proficient of the suppliers.”

Even after hiving off its fuselage maker, the two companies were highly dependent on one other. Spirit has tried to diversify, but still generates about two-thirds of its revenue from its onetime parent. Moreover, Spirit's persistent troubles, including improperly drilled holes and incorrect fitting installations, have weighed down Boeing, because it makes parts for several of its planes, including the main body for the 737 line of aircraft.

The corporate split, a popular maneuver by chief executives and one often encouraged by activist investors, also left Spirit financially weaker. Over the past decade, its net profit has totaled only about $500 million, which probably played a part in its manufacturing problems. In October, Boeing agreed to inject $100 million into Spirit in return for, among other things, its supplier hiring more workers and agreeing to show improved quality.

Ultimately, neither benefited from the spinoff. The stocks of Boeing and Spirit have both lagged the S&P 500 Index  since the separation. Moreover, the U.S. Federal Aviation Administration said in January that it would not allow Boeing to increase production of its 737s until it is satisfied the quality control issues have been resolved.

Buying Spirit should help. Extra workers can be deployed to build fuselages. Having complete oversight of the operations also promises to ensure things get done right the first time. Improved manufacturing would buff Boeing’s tarnished image. The plane maker learned a lesson about carve-ups the hard way. Other companies considering doing something similar can prevent enduring such destructive turbulence.