By Valerie Insinna and Abhijith Ganapavaram
(Reuters) -Spirit AeroSystems CEO Tom Gentile has stepped down in the wake of a series of industrial difficulties, with the major aerospace supplier naming former Boeing executive and Pentagon official Patrick Shanahan as his interim replacement.
Shanahan, who has served on the company’s board since November 2021, will become interim CEO effective immediately, Spirit announced Monday.
Spirit said its board will conduct a search to identify a new CEO, while Gentile will stay on as a consultant for three months.
Spirit shares have fallen 45% since the beginning of the year due to financial difficulties, including a two-week work stoppage at its Kansas-based production plant this summer, the discovery of several costly 737 production errors, and more than $200 million in losses on Airbus and Boeing plane production programs.
Shares of Spirit were up 0.2% in early trading.
Gentile was named Spirit’s CEO in August 2016, months after he joined the company as its chief operating officer. He oversaw the company during the 737 MAX crisis and pandemic, steering plans to diversify Spirit revenues with more defense and aftermarket work.
The last months of his tenure were marked by a series of supply chain challenges and production defects, most recently misdrilled holes on the 737 MAX aft pressure bulkhead.
In September, Gentile said current contracts with Boeing and Airbus were “not sustainable” due to rising inflation and needed to be renegotiated.
BATTLING STRONG HEADWINDS
Sources said Gentile’s position had looked increasingly vulnerable for weeks as support ebbed away from investors and, most critically, the major customer Boeing.
Gentile’s departure was a “foregone conclusion” given Spirit’s current financial difficulties, but “it’s hard to see how anyone could have coped with the headwinds,” said Richard Aboulafia, an aerospace analyst with AeroDynamic Advisories.
However, “Shanahan is one of the few people who could be up to the job” given his close relationship with Boeing – Spirit’s top customer – and reputation for execution, Aboulafia added.
Over a 31-year career at Boeing, Shanahan was known as “Mr. Fix-It” for his ability to turn around poorly-performing programs. He was put in charge of the 787 Dreamliner in 2008 during a troubled time in the program’s development and rose to become Boeing’s senior vice president for supply chain and operations in 2016.
His career with Boeing ended in 2017, when he became deputy secretary of defense. He was tapped to succeed Jim Mattis as defense secretary in May 2019, but withdrew in June 2019.
Shanahan said in a statement he intends to stabilize Spirit’s operations and “optimize” cash flow.
“I believe Spirit possesses the assets, know-how and talent to satisfy the extraordinary aviation demand and mitigate global supply chain challenges,” he said.
Areas where Shanahan may aim to put focus include preparing for upcoming production ramp-ups and reviewing contracts with Airbus, Boeing and other customers, said Alex Krutz, founder of the Patriot Industrial Partners consulting group. The timing of the announcement could also allow Shanahan to meet with key customers and suppliers at an Aerospace Industries Association meeting convening in Wichita, Kansas on Tuesday.
(Reporting by Abhijith Ganapavaram in Bengaluru and Valerie Insinna in Washington; Editing by Shailesh Kuber and Sharon Singleton)