Spirit AeroSystems has closed the book on a financially painful, six-year foray into the business jet market, reaching an agreement with Triumph Group to take over wing assembly work in Tulsa, Oklahoma for Gulfstream G650s and G280s.
Wichita-based Spirit had been seeking a buyer for the Gulfstream wing work packages since reporting more than $1 billion in write downs on both projects since 2012.
After launching into the business jet market following its 2005 divestment from Boeing, the transaction with Triumph gives Spirit even less to show for its effort. The terms of the agreement require Spirit to pay $160 million to Triumph to take over the projects inside the Tulsa facility, while reporting another forward loss of between $205 million and $235 million. The loss will be mitigated by a tax benefit of $220-230 million, Spirit says, if the transaction closes as expected by 1 January.
Spirit chief executive Larry Lawson, who replaced former CEO Jeff Turner in the wake of the forward losses on Gulfstream and other programmes, says the transaction “offers compelling positives for both companies”.
Triumph does not expect the wing assemblies to become profitable for three more years, but it re-establishes the company as a key Gulfstream supplier. Triumph Aerostructures, formerly Vought Aerospace, had supplied wings for the G450 and G550 before losing bids to Spirit to perform the same work on the G280 and G650. Gulfstream decided to internally build the wings for the recently announced G500 and G600 jets.
At the time of Spirit's selection, the deals were viewed as landmark victories in Turner’s strategy to diversify the company away from reliance on only Boeing as a customer. This strategy also led Spirit to win major aerostructures packages on the Airbus A350 and Sikorsky CH-53K, as well as the Boeing 787. The 787 and A350 programmes also have yielded forward losses for Spirit, but the wing assemblies for the G650 and G280 proved especially painful.
Lawson, formerly chief executive of Lockheed Martin Aeronautics, has decided to steer Spirit away from the business jet market to focus on commercial transports and military programmes.
Despite selling the wing work packages to Triumph, Spirit still owns the production facilities in Tulsa, which also produce wing components for programmes such as the 787.
“As for the other Tulsa programmes, we are taking a pause in the process to evaluate the remaining work,” says Lawson. “There are a number of factors to take into consideration, including exploring our options within the community and with other constituents who have approached us. We won't rush the evaluation and will provide an update as soon as we are ready.”
Source: FlightGlobal.com
