Boeing Co. said Tuesday it will buy Vought Aircraft Industries’ plant in North Charleston, where Vought builds the rear fuselage sections of Boeing’s long-delayed 787 Dreamliner.
Boeing will pay about $580 million in cash at closing and release Vought from its obligation to repay money Boeing had advanced to it, the company said. The Seattle Times put those advances at $422 million, bringing the cost of the deal to about $1 billion.
Boeing told workers about the purchase at an 8:15 a.m. meeting, The Post and Courier reported.
“Integrating this facility and its talented employees into Boeing will strengthen the 787 program by enabling us to accelerate productivity and efficiency improvements as we move toward production ramp-up,” said Scott Carson, president and CEO of Boeing Commercial Airplanes, in the company’s announcement.
Why Vought is selling
Vought, a Texas-based aerospace supplier, said the Dreamliner’s costs had grown too large for it to carry.
“We take great pride knowing that we have been able to satisfy the technological and physical demands of the 787 program alongside much larger companies,” said Elmer Doty, Vought’s president and CEO. “However, the financial demands of this program are clearly growing beyond what a company our size can support.”
Vought is owned by the Carlyle Group, a private equity firm that declined to put more money into the company and has been looking to sell all or part of it for at least a year, The Seattle Times reported. The North Charleston plant was offered without success to other potential buyers, including Spirit AeroSystems, another major 787 supplier, the newspaper reported.
Vought signed the purchase agreement Monday with BCACSC Inc., a Boeing subsidiary, according to a filing Vought made Tuesday with the Securities and Exchange Commission. Boeing will take over the plant, its assets and inventory, and assume most of the business’s liabilities. Vought keeps pre-closing environmental and certain tax liabilities and some employee benefit obligations, the filing said.
Vought expects to use the money to pay down a material amount of debt under its senior credit facility, and the sale cannot close until those lenders agree to amend the facility, according to the filing. Boeing said it expects the deal to close in the third quarter.
The two companies will settle all matters tied to Vought’s past work on the 787. Vought will keep working for Boeing under new agreements covering parts of the 737, 777 and 787, and will continue to build structures for the 747, 767, C-17 and V-22 at its other plants, Boeing said.
What the plant does
The North Charleston plant fabricates and assembles the 787’s rear fuselage sections, made mostly of composite materials, and installs their systems, Boeing said.
Next door, Global Aeronautica puts together the sections Vought builds and joins two mid-fuselage sections built in Italy by Alenia to a section built in Japan by Kawasaki, The Seattle Times reported. The two resulting assemblies are flown to Boeing’s 787 final assembly plant in Everett, Wash. Vought sold its half of Global Aeronautica to Boeing in June 2008 for $55 million, making it a Boeing and Alenia joint venture, according to the newspaper.
Production workers at the Vought plant voted narrowly to join the International Association of Machinists, The Seattle Times reported. In a federal filing in March 2008, Vought said the union had been certified to represent about 200 production and maintenance employees in North Charleston.
A second line?
Once the purchase closes, the plant will be managed by Boeing’s 787 program, the company said. The deal leaves Boeing’s commercial airplane business owning substantial aircraft assembly operations on the East Coast for the first time in its history, The Seattle Times reported.
The possibility of the sale has raised concerns in the Northwest that it would make it easier for Boeing to steer a proposed second 787 production line to the Lowcountry rather than the Puget Sound area, The Post and Courier reported. Boeing has said no decision has been made.
Washington Gov. Chris Gregoire said Carson told her about the purchase Monday and “assured that no decision has been made on a potential second line for the 787, and that today’s announcement doesn’t have anything to do with that,” according to The Seattle Times.
Aviation analyst Richard Aboulafia of the Teal Group told The Post and Courier last week that one reason Boeing would want the plant is direct control of a key supplier as it works to get the Dreamliner in the air. The jet’s first test flight, scheduled for last month, was called off and has not been rescheduled, the newspaper reported.
“I think they have to catch up pretty fast,” Aboulafia said.
Deliveries of the 787 were running nearly two years behind schedule even before last month’s delay, The Seattle Times reported. Boeing spokesman Jim Proulx said the company is not changing its approach of having suppliers around the world build large sections of the airplane.
“We remain committed to the business model and the global strategy for the 787,” Proulx said, according to the newspaper.
Boeing shares fell 3.8% to $39.01 near the end of trading Tuesday, The Seattle Times reported, as shares of other aerospace companies also fell.
“We look forward to welcoming the South Carolina team to Boeing and continuing our relationship with Vought to bring the most value to the 787 and our other programs,” Carson said.
