Boeing, in Strategic Shift, to Sell Commercial-Plane Plants to Onex

The Wall Street Journal 02/23/05
author: Jonathan Karp
(Copyright (c) 2005, Dow Jones & Company, Inc.)

Boeing Co. agreed to sell its commercial-aircraft factories in Kansas and Oklahoma to Onex Corp. of Canada for $900 million, marking a strategic shift as the Chicago aerospace giant seeks to cut production costs and focus on engineering and final-assembly work rather than manufacturing.

Boeing's defense unit announced separately yesterday that it agreed to sell its Rocketdyne rocket-engine business to United Technologies Corp.'s Pratt & Whitney division for about $700 million. The sale, which is subject to regulatory approval, would accelerate the consolidation of the financially troubled commercial and government rocket business. Boeing will continue to make rockets and satellites.

The commercial-aircraft deal has broader significance because, if approved by labor unions and government regulators, it would be the first time Boeing hands control of major production facilities to an outside company. The plants in Wichita, Kan., and Tulsa and McAlester, Okla., will continue producing the fuselage for Boeing's 737 airliner as well as cockpit sections and engine cowlings for most of the company's other jetliners. The facilities, known as the Wichita/Tulsa division, will also be a major supplier for Boeing's future 787 Dreamliner airplane.

The deal entails "long-term supply agreements that provide Boeing ongoing cash savings," the company said. Onex will also assume some $300 million of liabilities.

There would seem to be some downsides to this strategy... These suppliers now control our business.