WICHITA, Kan. (KSNW) — Spirit AeroSystems is giving workers and investors a better idea of what is affecting the bottom line these days. On Tuesday, the Wichita-based company released its latest financial results — a loss of $616.7 million in the first quarter.

Spirit President and CEO Pat Shanahan and Chief Financial Officer Mark Suchinski held a news conference after the report was released.

They discussed Boeing possibly buying the company, a slowdown in production, the Spirit AeroSystems’ workforce, and an ongoing issue with Airbus.

Boeing acquisition?

Before tackling the financial details, Shanahan talked about Boeing possibly buying Spirit.

“Those discussions continue, and as all of you understand, I am not at liberty to comment further,” he said. “When and if we have something to disclose, we’ll make an announcement.”

He was asked what the value of an acquisition would be for Spirit’s investors.

“The broader value proposition is sharpening engineering and manufacturing expertise for the future. That’s a skill that’s hard to acquire,” Shanahan said. “Whether you’re a Short Brothers of Bombardier that roots trace back 100 years, you know, the depth of expertise that’s here at Spirit in Wichita is similar.”

Production slowdown

Shanahan said several factors are hurting the company’s finances. One is the slowdown in production that started after a door plug blew out on an Alaska Airlines 737 Max 9 in January. The plane was forced to make an emergency landing.

Boeing slowed 737 production below 38 a month in order to add quality and safety measures. Measures that Shanahan supports.

“The Spirit team is focused on driving our safety and quality efforts,” he said. “We’ve made step function changes in how we inspect, where we inspect and how we do that together. The benefits in the short term have been we’ve seen about a 15% improvement in quality.”

However, Shanahan said Boeing’s inspection process change, in effect, paused Spirit’s ability to receive payment for completed fuselages. Boeing has advanced Spirit $425 million.

The 737 product rate is currently at 31 airplanes a month.

“We now expect to remain at the lower-than-planned rate throughout the rest of the year,” Suchinski said. “Similarly, on the 787 program, we are now anticipating delivering approximately 55 units during 2024, down from our original plan of approximately 80. All of these items will have a negative impact on cash flow throughout the year, but I want you to know we are strongly focused on liquidity and actions to improve our current position.”

Spirit’s workforce

Spirit’s president says a slowdown in the production rate does not necessarily mean the number of employees will drop.

“Our teammates aren’t 100% variable with rate,” Shanahan said. “It doesn’t make sense to go up and down and have people go in and out the door. We’ve invested a lot in their training.”

Of the 21,000 employees Spirit has worldwide, 12,500 work at its Wichita plant.

“They’re a critical part of our company, so we’re trying to find the right balance here, so as the system recovers, we don’t go through the quality issue or a training issue and repeat some of the things that hit us hard coming out of COVID,” he said. “We’re talking about smaller numbers, not big numbers like we did with the shutdown of COVID, but it’s a balance of financials and maintaining a bridge of talent.”

Shanahan said Spirit will have to make some decisions in the next couple of weeks.

“Those decisions will be preceded by conversations with the union, other constituencies, but I think we’ve got a very solid approach to being able to respond quickly as Boeing turns their rates back up,” he said.

Suchinski said the company needs to protect future production rates.

“We’re going to be carrying some additional costs, and it’s going to have a near-term impact on profitability and cash, but it’s the best thing for the long-term,” he said. “As Pat said, we’re going to be going up in rate. The production, the demand is there, and so we’re working very hard to protect the production system while balancing our financial situation at the same time.”

Impasse with Airbus

The company says its stalled price negotiation with Airbus also hurts the bottom line.

“As a result of this impasse and the continued pressure on meeting the delivery targets demanded by the rapid rate in the Airbus A350 and 220 programs, we’ve booked significant losses this quarter,” Shanahan said.

“If you look at our balance sheet and you look at current forward loss reserves or liabilities, I would say that Airbus is about 80 to 85% of those balances,” Suchinski said.

Shanahan said Airbus wants to ramp up production of the A350 by 43% this year. It also wants an increase of 52% on the A220 in one year.

“As you can imagine, there’s an intensity of conversations going on there,” he said. “We have never stopped talking about price with Airbus. We haven’t made the progress we want, but we’ve never stopped talking about price.”

He said the conversations continue on many different levels.

“We have risen to the challenge thus far and will continue to work with Airbus to ensure that quality and safety remain the foremost considerations,” Shanahan said.

Is Shanahan interested in being Boeing’s CEO?

During the news conference on Tuesday, Shanahan was asked if he has any interest in becoming the new CEO at Boeing. The current CEO, David Calhoun, plans to retire at the end of the year.

“I wake up every single day focused on Spirit, our teammates here, our suppliers, customers and shareholders, and that’s my plan,” he said.