Boeing is selling its commercial-aircraft plants in Kansas and Oklahoma to a Canadian-based investment group, part of the aerospace giant's strategy to focus on design and final assembly.
WICHITA, Kan. — Boeing is selling its commercial-aircraft plants in Kansas and Oklahoma to a Canadian-based investment group, part of the aerospace giant’s strategy to focus on design and final assembly.
Onex yesterday agreed to buy Boeing’s commercial-aircraft facility in Wichita, along with plants in Tulsa and McAlester, Okla., for $900 million cash and the assumption of $300 million in liabilities. Chicago-based Boeing has been trying to sell the plants for more than a year.
“There have been terrible job losses at these plants over the last several years. We confidently believe that can be reversed,” Seth Mersky, a managing director of Toronto-based Onex, said in a statement.
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Separately, Boeing announced the sale of its Rocketdyne rocket-engine subsidiary to United Technologies, parent of jet-engine maker Pratt & Whitney, for about $700 million cash. Rocketdyne, based in Canoga Park, Calif., has sites and assets in California, Alabama, Mississippi and Florida and 3,000 employees.
Onex’s new aerospace company, yet to be named, would include members of Boeing management. No decision has been made on how many Boeing workers would be hired, pending negotiations with union officials.
As an independent company, Onex hopes to attract business from Boeing competitors such as Airbus and from smaller regional aircraft manufacturers.
Boeing is Kansas’ largest private employer; about 7,200 people work at the Wichita commercial plant, along with as many as 1,300 at the two smaller facilities in Oklahoma.
Boeing’s defense operations in Wichita, with 5,000 workers, are not involved in the sale.
The Wichita commercial plant houses Boeing’s largest remaining segment of aircraft-component manufacturing, producing parts for all Boeing jets except the 717, which is ending production next year.
The Onex deal includes long-term agreements for the company to provide Boeing with parts, including fuselage sections and wing elements, on four of Boeing’s existing planes and the new 787 Dreamliner.
Mersky said Onex plans to invest $1 billion in Kansas and Oklahoma during the next five years and plans to seek business with other aircraft makers.
“If [Onex] can get additional business, which undoubtedly they should, they’ll be adding to employment,” said Paul Nisbet, an analyst with JSA Research. He expects the deal to lower Boeing’s production costs. “I think everybody wins.”
Boeing officials said the company had received bids from several parties.
“We thought Onex was the right buyer, at the right time, because of their track record working with employees, the unions, the community and their track record growing companies,” said Jim Morris, senior vice president of supplier management for Boeing Commercial Airplanes.
Shares of Boeing fell 63 cents to $52.15 yesterday on the New York Stock Exchange. They are up about 1 percent this year after a 23 percent rise in 2004. Both sales were announced after the markets closed.
Boeing expects to recognize a noncash loss from the deal, which is subject to close in the second half of the year, pending regulatory approval.
Onex plans to form a new company to run the plants, to be led by Jeff Turner, vice president and general manager of Boeing’s operations in Wichita and Oklahoma.
“This agreement fully supports our strategy to focus Boeing on large-scale systems integration, which is where we are most competitive and can add the most value to our airplanes and services,” said Boeing commercial-airplanes chief Alan Mulally.
Boeing is operating its commercial-production facilities at 50 percent capacity, by all accounts too low for optimal use, said Nigel Wright, Onex’s managing director. More than 15,000 aviation workers in Wichita lost their jobs in an industry downturn that accelerated after the 9-11 attacks.
“In a time when so many jobs and industries are leaving our shores, we’re encouraged by Onex’s willingness to invest in a showcase U.S. industry,” said Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, whose Wichita local represents nearly 6,000 Boeing employees.
Onex has global operations in service, manufacturing and technology industries. The company, which boasts 140 acquisitions, does not operate the businesses it acquires but works with local management teams.
Onex specializes in buying distressed companies it believes can be turned around.
Last week, the conglomerate completed the purchases of two large U.S. health-care firms for about $1 billion: American Medical Response and EmCare Holdings, which between them have more than 22,000 employees.
Rocketdyne, which had nearly $700 million in sales last year, supplied the main engines for the space shuttle in the 1980s and has continued to build booster engines for Atlas and Delta rockets. It became part of Boeing in 1996 when the plane maker bought the aerospace divisions of Rockwell International.
Jim Albaugh, CEO of Boeing’s St. Louis-based defense unit, said the divestiture makes sense strategically even though the company will still build launch systems.