Skip to main content
Advertising

Originally published August 15, 2014 at 5:21 PM | Page modified August 16, 2014 at 10:03 AM

  • Share:
             
  • Comments
  • Print

Rich exit for buyers of Boeing spinoff

The private-equity firm that built Spirit AeroSystems after buying Boeing’s major parts plant in Wichita made a hefty profit when exiting the investment this month. Also, tech titans like Nadella and Bezos get drenched to raise money for ALS.


Seattle Times business staff

Reader Comments
Hide / Show comments
$3.2 Billion? At least $2 billion of that should be handed over in taxes to the gov't. That would be patriotic. ... MORE

advertising

Canadian private-equity firm Onex, which in 2005 bought Boeing’s major parts plant in Wichita, Kan., and two smaller Oklahoma facilities, made its final exit from the deal this month with a hefty financial gain: Nine times its original $108 million investment.

The former Boeing plants formed the nucleus of the much enlarged Spirit AeroSystems, and Onex tallied its profits as it sold off its remaining Spirit stake.

The move comes just as the workforce at Spirit faces some new uncertainty.

Onex bought Spirit for $950 million, including its own equity investment plus $267 million additional equity from its fund partners, with the rest of the purchase price borrowed.

It reported this month that over the nine years since the buyout, the firm and its partners got back a massive $3.2 billion.

That profit came as Spirit’s revenue and earnings ballooned due to higher Boeing airplane-production rates along with expansion into new business for Airbus and Gulfstream. After paying its partners their portion, Onex said its share of the gain was $975 million.

So Spirit certainly turned out well for Onex. How did it work out for the workers?

Initially, there was some tough medicine, followed by years of growth and new energy.

When Onex bought the parts operations in Kansas and Oklahoma in 2005, about 9,500 Boeing employees had to reapply for work at the new company.

The new owners argued that to make it as a company independent of Boeing, costs had to be reined in.

About 1,100 of the former workforce were cut loose and the International Union of Machinists (IAM) union had to agree to a 10 percent pay cut for its members.

But from that start, Spirit grew quickly. Today it employs about 13,500 people in Kansas and Oklahoma.

Spirit makes the entire fuselage of every Boeing 737, as well as the cockpit and forward fuselage section of all the other Boeing jets.

But as planned since it became a separate company, Spirit expanded way beyond its Midwestern Boeing roots.

It bought two airplane-parts factories in the U.K. to service Airbus, built a plant in North Carolina to make Airbus A350 fuselage parts, then added plants in Malaysia and France.

Today Spirit has a worldwide workforce of about 15,900 people.

And in contrast to the situation at parent company Boeing, Spirit has boasted positive labor relations.

Onex had come in with a reputation as an unusually labor-friendly buyout firm, and that influence bore fruit in 2010 when Spirit’s leadership and the IAM signed a 10-year labor contract.

But that deal is beginning to show signs of strain.

Some of Spirit’s rapid expansion came from hastily signing contracts that proved to be money losers.

After surprising hits to earnings in the last few years, the stock price hit a low of $14 in November 2012.

Spirit has brought in a new chief executive, Larry Lawson, who is heavily restructuring operations. He’s trying to sell off the Oklahoma operations and is actively weighing the outsourcing of some fabrication work in Wichita.

This month he told analysts he’s “looking at, frankly, the things that we do vs. the things that we could buy,” sparking a lawsuit from the IAM, which claims that 2010 contract bars any outsourcing of union work.

The lawsuit claims that “at least 1,400 employees are in imminent danger of losing their jobs.”

The company says it’s complying with the IAM contract and hasn’t made any firm decision to outsource work.

Lawson’s moves have reassured Wall Street. Spirit management is projecting about $6.8 billion in revenue this year. The stock is back up above $36.

However Spirit’s future plays out over the next year or two, Onex is no longer a part of it.

In a statement, Onex senior managing director Seth Mersky praised both Spirit’s leadership and workforce, and said his firm is leaving the aerostructures company as a “thriving business.”

Dominic Gates: dgates@seattletimes.com

Tech chiefs get drenched for ALS

Dousing oneself with a bucket of ice water was all the rage last week with Seattle’s tech titans.

Microsoft co-founder Bill Gates, Microsoft CEO Satya Nadella, and Amazon CEO Jeff Bezos all took part in the viral phenomenon known as the ALS Ice Bucket Challenge.

They joined Justin Timberlake, Peyton Manning, New Jersey Gov. Chris Christie and many more who were challenged by others to either post a video of themselves getting drenched or donate money to the ALS Association.

ALS — amyotrophic lateral sclerosis, also known as Lou Gehrig’s disease — is a neuromuscular disease that affects nerve cells in the brain and spinal cord, causing those with the disease to progressively lose control of their muscle movements.

Gates, who was challenged by Facebook CEO Mark Zuckerberg, took a decidedly geeky approach to the task, posting a video in which he draws up blueprints for a contraption to dunk himself.

Gates, who also donated money, then challenged Tesla Motors and SpaceX CEO Elon Musk, entertainment host Ryan Seacrest and TED curator Chris Anderson.

Nadella’s participation in the ice-bucket drenching was spurred by a challenge from former NFL player Steve Gleason, a former safety with the New Orleans Saints and a former football star at Washington State University.

Gleason, who has ALS and uses a wheelchair, has been working with Microsoft for a few years now, using the company’s Surface tablet, along with Tobii eye-tracking technology, to communicate. The Surface tablet turns what he “types” on the tablet with his eye movements into speech.

Recently, Gleason worked with a team from Microsoft during the company’s first global hackathon.

The team, called Ability Eye Gaze, worked with Gleason to develop ways to keep his Surface always on, to improve the speed at which his eye movements turn what he “types” into speech, and to allow him to move his wheelchair using a joystick guided by his eyes.

That team was announced this past week as the grand-prize winner of the companywide hackathon, in which Microsoft employees worldwide worked on some 2,700 different projects.

The Ability Eye Gaze team got the chance Wednesday to dump ice water on Nadella, who, after his drenching, challenged Bezos and Larry Page to take their own Ice Bucket Challenge.

In addition to donating to the ALS Association, both Nadella and Microsoft gave money to Team Gleason and the ALS Association.

Bezos took his dousing at an all-hands meeting for Amazon employees on Friday at KeyArena. Before he dumped the bucket of water on his head, he talked about the process of figuring out whom he would challenge.

Bezos joked that he considered Edward Snowden, Queen Elizabeth II, Pope Francis and Kim Jong Un.

In the end, though, Bezos, a huge Star Trek fan, settled on William Shatner, Patrick Stewart and George Takei.

Like the other executives, Bezos also made a personal donations to the ALS Association.

The association said Friday that it had received $9.5 million in donations between July 29 and Aug. 15, compared to $1.6 million during the same time period last year.

Janet Tu: jtu@seattletimes.com and Jay Greene: jgreene@seattletimes.com



Free 4-week trial, then $99 a year for unlimited seattletimes.com access. Try it now!

Also in Business & Technology

News where, when and how you want it

Email Icon

Free 4-week trial, then $99 a year.

Free 4-week trial, then $99 a year.

Unlimited seattletimes.com access. Try it now.

Advertising

Advertising


Advertising
The Seattle Times

The door is closed, but it's not locked.

Take a minute to subscribe and continue to enjoy The Seattle Times for as little as 99 cents a week.

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Subscriber login ►
The Seattle Times

To keep reading, you need a subscription upgrade.

We hope you have enjoyed your complimentary access. For unlimited seattletimes.com access, please upgrade your digital subscription.

Call customer service at 1.800.542.0820 for assistance with your upgrade or questions about your subscriber status.

The Seattle Times

To keep reading, you need a subscription.

We hope you have enjoyed your complimentary access. Subscribe now for unlimited access!

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Activate Subscriber Account ►