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Spirit AeroSystems reviewing major plane programs

Keywords: Tags  Spirit AeroSystems Holdings, earnings report, Gulfstream Aerospace, Boeing, Airbus, Larry Lawson, Philip Anderson, aerospace Frank Haflich

LOS ANGELES — Aerospace contractor Spirit AeroSystems Holdings Inc. has launched reviews of its major programs as it looks to resolve cost problems.

Spirit, generally regarded as Boeing Co.’s largest airframe subcontractor, posted first-quarter net income of $81.2 million, up 10.3 percent from $73.6 million in the same period last year, on revenue that climbed 13.9 percent to more than $1.44 billion.

"We’re looking at all aspects of the business and we’re not leaving any element of it untouched," president and chief executive officer Larry Lawson said, according to a transcript of an earnings conference call, including discussions with the company’s major customers, although he didn’t give details of the talks.

Wichita, Kan.-based Spirit first indicated late last year it could attempt to renegotiate some of its major contracts after writing off $590 million in the third quarter of 2012 (, Oct. 30).

Spirit delivered a total of 336 shipsets in the first quarter—159 to Chicago-based Boeing, 157 to Toulouse, France-based Airbus SAS and 20 for business and regional jets—compared with 303 shipsets in the first three months of last year.

With Spirit’s large commercial aircraft deliveries increasing 8.6 percent in the first quarter and deliveries across all programs increasing 10.9 percent from a year earlier, Lawson believes the time has come to engage in "a comprehensive evaluation of the development programs" at Spirit’s facilities in Wichita; Tulsa, Okla.; Kinston, N.C.; and St. Nazaire, France.

Spirit builds center fuselage frame sections at the North Carolina plant for Airbus’ new A350 XWB (extra-wide body) airliner, expected to be the main direct competitor to the Boeing 787 Dreamliner, and ships them to St. Nazaire for assembly into the center fuselage barrel for delivery to Airbus.

Earlier this year, it was reported that Airbus was considering acquiring the St. Nazaire operation in order to gain better control of its supply chain, although neither company has confirmed the reports.

Spirit’s third-quarter writeoff of $590 million included $163 million in losses associated with work the company had done for Gulfstream Aerospace Corp. Senior vice president and chief financial officer Philip D. Anderson said during the earnings conference call that Spirit continues to ship to Gulfstream, but he acknowledged that problems remain in Spirit’s relationship with the Savannah, Ga.-based jet manufacturer. While "we do deliver (and) we do get paid" by Gulfstream, important issues still must be resolved, he said. "It’s not a full payment at this point, which is one of the challenges."

Operating earnings by Spirit’s fuselage business segment jumped 37.8 percent to $121.4 million in the first quarter on a 15.3-percent increase in revenue to $717.9 million, and propulsion systems’ earnings rose 12 percent to $65.3 million on a 9.1-percent rise in revenue to $375.3 million. But wing systems’ operating earnings fell 12.5 percent to $18.2 million, due in large part to a pre-tax $15-million forward-loss on the 787 wing related to "manufacturing cost growth," despite a 15.7-percent increase in revenue to $343.3 million.

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