Spirit AeroSystems Inc. and its CEO and CFO are facing a class-action lawsuit filed by a shareholder, following the recent revelation of a manufacturing defect in some Boeing 737 MAX planes. The lawsuit, which demands a jury trial, was filed on Wednesday in the Southern District Court of New York by shareholder Hang Li.
The lawsuit alleges that Spirit, its CEO Tom Gentile, and CFO Mark Suchinski failed to disclose the production defect to investors before it was publicly reported. It also claims that the company and its executives misled shareholders and artificially inflated the price of their shares, resulting in investor losses.
Boeing halts deliveries of some 737 MAXs after supplier part issues
Boeing announced the manufacturing issue on April 13 and identified Spirit as the responsible supplier, causing the fuselage manufacturer’s shares to plummet by 20% the following day.
Despite the defect, both Spirit and Boeing have indicated in recent weeks that they maintain plans to increase MAX production throughout the year and continue to ramp up production into the mid-decade.
According to the Wichita Business Journal, Spirit shares closed at $28.22 on the day after being publicly named by Boeing. The stock has continued to fall since then, particularly after the company’s Q1 earnings report on May 3, closing at $24.61 per share on Thursday.
The defective fuselage sections need to be inspected for an issue with fasteners that connect the tail to the plane. The Federal Aviation Administration has said the problem poses no safety risk, and repair work on stored and in-production fuselages in Wichita is expected to last until July.
It is unclear how long repair work on completed planes will take or how many planes are affected by the problem, though it is anticipated that hundreds of MAX planes in service will be impacted over time. Gentile and Suchinski told analysts in the company’s quarterly conference call that 35-40 Wichita fuselages (approximately 60% of local inventory) will require repairs.
Boeing had previously estimated that up to 75% of the 220 737 MAXs in inventory would need the repair package.
Boeing CEO David Calhoun previously described the problem as «gnarly» and credited a Spirit employee for reporting the issue during the process, as it is not possible to verify it once Spirit’s production work is complete.
Spirit manufactures around 70% of the MAX in Wichita, including the plane’s entire fuselage. Despite the problem, the MAX is currently being built at a rate of 31 units per month and is still expected to reach 42 per month in October.
