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I N T H I S I S S U E :
747-8 FREIGHTER4
6
10
FEATURE ARTICLES
2 MOMENTUM
COMMUNITY12
4TH QUARTER 2008 FINANCIALS14
STOCK WATCH15
2009
V O L U M E T H R E E
N U M B E R O N E
2009 COMPANYFOCUS
8
EXCELLENCE INERGONOMICS
GULFSTREAM G650
MOMENTUMTHE SPIRIT AEROSYSTEMS MAGAZINE2009 ISSUE ONE
EDITOR:Lisa Conklin
CONTRIBUTORS:Brian BlackStacey BrownChris GilmoreJoseph OnijalaLin RamsayBob Smith
Momentum is published quarterly for external readers as well as Spirit AeroSystems employees worldwide.
The copyright for photographs and illustrations in Momentum is not always owned by Spirit AeroSystems. Please contact Spirit AeroSystems for more information.
CONTACT:MomentumP.O. Box 780008 MC K12-14Wichita, KS 67278-0008momentum@spiritaero.com
To subscribe to the electronic version of Momentum, visit www.spiritaero.com/momentum.aspx
© Spirit AeroSystems, 2009
SHADOW WORKS
5
spiritaero.com 3
Spirit’s 747-8 Freighter team celebrated a major
program milestone in December 2008. Spirit’s major
assembly build team successfully completed and shipped
the first forward section for the program.
“Thanks to the knowledge, skills and abilities of Spirit’s
747 build team, we were able to overcome unique design
challenges and time constraints to successfully build and
deliver the first 747-8 Freighter forward section to Boeing,”
said Stan Ternes, 747 Structures Product Line Manager.
Boeing’s 747-8 Freighter boasts a number of innovative
improvements. The program is using 787 technologies
to significantly improve the economics and functionality
of the airplane while also improving fuel efficiency and
reducing emissions and noise. It has a new wing design,
next-generation GEnx engines, and a modern flight deck.
Parts of the 747 airplane have been built in Spirit’s
Wichita facility dating as far back as 1967.
4 MOMENTUM
ANOTHER MILESTONE
747-8 image courtesy of The Boeing Company
spiritaero.com 5
In March 2008, Spirit announced a contract to design, produce and integrate a flight-ready wing for the Gulfstream G650 Business Jet. Because preliminary design work had begun prior to the announcement, the team has nearly two-and-a-half years invested in the program. The wing assembly work will be done at Spirit’s Tulsa, Okla., facility; nearly 400 employees from all areas of the company came together to assist in the success of the program.
In January 2009, Spirit’s AeroStructures Business Unit completed a major milestone on the program with initial assembly work beginning in the final assembly jig, or tooling fixture. The wing’s primary structure includes ribs, spars and wing skins which all come together in the final assembly jig.
One of the more impressive accomplishments on the program came in the engineering phase. During this phase, Spirit engineers successfully developed the wing box, fixed leading edge, fixed trailing edge, and flight control surfaces. Equally challenging was the design and integration of the
mechanical and electrical systems for the “fly-by-wire” control surfaces.
Program management said that much of 2008 was spent fabricating detail parts and sub-assemblies in support of the wing box assembly efforts. Approximately 6,000 detail parts and assemblies will be supplied by Spirit’s worldwide supply base. Of those 6,000 parts, nearly 1,000 are being manufactured by Spirit’s Wichita facility.
Also in 2008, the G650 sub-assembly and final assembly areas were prepared in Tulsa. One significant highlight is the 60-foot-long upper and lower wing skin assembly tool and automated fastening equipment that were completed in preparation for production.
Spirit’s first flight test article for this program is scheduled to be completed in the second quarter of 2009, and closely followed by subsequent units. Spirit is scheduled to deliver its first production unit to Gulfstream near the end of 2009.
PREPARING for PRODUCTION
Initial assembly work for the first Gulfstream G650 wing structure comes together in a final assembly jig.
6 MOMENTUM
SPIRIT EMPLOYEES TACKLE ERGONOMICS ISSUES
Two shoulder injuries and a hernia operation. That was the
employee injury tally in Spirit’s 777 thrust reverser blocker door
assembly area when employees decided to do something about it.
The result ended up being much more than simply a reduction of
injury risk.
When 777 mechanics began having shoulder issues because
of the awkward positions they had to endure while using torque
tools, Production Operations Specialist Mark Brunhoeber and his
team saw an opportunity to help alleviate body injury.
“Our main goal was to fix the problem so employees weren’t
getting hurt when they performed the task,” Brunhoeber said.
“In addition to reducing the injury risk, we ended up gaining
significant benefits on production time and quality.”
The team’s project was part of Spirit’s ergonomics focus.
The company’s ergonomics group began a program in 2008 to
actively encourage employees to take ownership in their workplace
environment, and to seek improvements to their working
conditions.
“The
teams who
participate in this program are
made of employees that really have a direct
contribution to the impact of their work life,” said Kathy
Jester, Spirit ergonomist. “It gives them a positive avenue and a
way to take ownership of their health and well being.”
The program to which Jester is referring a Spirit-created program
based on an international ergonomics competition. After seeing
what was done on the national level, Spirit ergonomists were
energized to initiate a similar program locally.
A VENUE FOR INNOVATIONThe inaugural year for Spirit’s internal competition, called Spirit
Ergonomics Excellence Cup, yielded 82 entries from employee
teams on the shop floor. After narrowing the entries down to 17
finalists, an external panel of judges scored the entries based on
the same criteria as the international competition. One Spirit entry
was even accepted to the international competition, which will
take place in March 2009.
TAKING OWNERSHIP
spiritaero.com 7
The project finalists were graded on a number of criteria, including innovation,
cost savings, study/experimentation, simplicity, applicability and risk reduction.
Each entry looked at the potential for ergonomic injury by assessing the old method,
and then re-assessing after the new method was implemented. Several of the
projects ended with a zero-risk rating.
With such significant results from the first year of the project, Spirit ergonomists
plan to continue the competition and innovation for years to come. In addition to
reducing the risk to employees in their jobs, other benefits typically come into play
such as cost savings, time savings, and an increase in quality.
Brunhoeber and Gary Bigley, 777 mechanic, know all too well.
“Previously, the physical force needed to complete the job was incredible,” said
Bigley. “What made the task so difficult was the short wrenches and awkward body
contortion required in the confined workspace. At the end of just half of a job, every
muscle in my upper body was in pain. Now, the job is 100 percent more enjoyable,
and there is no joint pain or muscle soreness,” Bigley concluded.
“The team was initially working on the ease of the job and to reduce the risk,”
Brunhoeber said. “We didn’t see the additional benefits until we compiled the data;
it was then we realized that together, we’d stumbled onto something great.”
777 mechanic Gary Bigley demonstrates the new torque process for blocker doors. The process was a result of a company-wide ergonomics competition.
ABOVE: SPIRIT ERGONOMISTS USE A RISK ASSESSMENT SOFTWARE PROGRAM TO DETERMINE RISK FACTORS BEFORE AND AFTER A PROJECT.
After scoring significant new-business wins in 2008 by
teaming with Airbus and Cessna to build all-new jetliners, Spirit
AeroSystems this year is pivoting toward raising its profile in two
areas: in the defense realm and the business- and regional jet
business.
DIVERSIFICATION IS THE NAME OF THE GAME
Three years after separating from Boeing, Spirit AeroSystems
continues the quest to diversify its customer base. The company’s
big announcement in May 2008 that it is teaming with Airbus to build
the A350 XWB jetliner demonstrated Spirit’s success in expanding
beyond its heritage Boeing contracted work.
With the new A350 work package in hand to design and build the
plane’s Section 15 fuselage, its fixed leading edge and spar, Spirit is
seeing the diversification effort begin to pay off.
“With that work package, we will become the largest structures
supplier for Airbus,” said David Walker, Spirit senior vice president -
Sales & Marketing.
“The A350 was the opportunity of the decade for us with Airbus,”
Walker said. “In order to diversify, we needed to take advantage of the
opportunity Airbus had before us. That’s what we did.”
OPPORTUNITIES AWAITWalker sees Spirit moving toward two opportunities this year.
The first is teaming with major defense-industry players such as
Boeing, Lockheed Martin and Northrop Grumman to build military
airframes.
The second is continuing to cultivate relationships with regional-jet
and business-jet builders.
Walker said new customers in those markets will broaden Spirit’s
business base.
Spirit already has its collective toe in defense-industry waters: it is
building the fuselage for Boeing’s P-8A and P-8I maritime submarine
surveillance aircraft. Spirit also has a major role in developing the CH-
53K helicopter’s cockpit fuselage.
But the company wants to take on more of a role in helping build
military aircraft.
“Our performance on the P-8A has been great,” Walker said. “I
know that the Boeing folks couldn’t be happier with our work.
“Performing that work grows our customer base, and that’s a credit
to our people out in the business units.”
Walker said Spirit is in line to possibly do more work for rotorcraft
contractor Sikorsky.
He cautions, however, that building relationships that lead to
contract signings take time.
“We worked two and a half years before signing the A350 contract.
There’s plenty of hard pick-and-shovel work that needs to be done
before we get there.”
That pick-and-shovel work falls on all Spirit employees, not just to
those in sales and marketing positions, Walker said.
“We need to continue to perform well for our customers,” he said.
“Our entire team is the face of Spirit. We’re like any other business:
if you please your customers with your performance, they will
become repeat customers.
“How the rest of the Spirit team performs is going to determine
how we do in the future.”
8 MOMENTUM
RENEWED FOCUSSPIRIT’S NEW BUSINESS FOCUS FOR 2009 WILL BE DIVERSIFICATION
“THE A350 WAS THE OPPORTUNITY OF THE DECADE FOR US WITH AIRBUS.”
-DAVID WALKER, SENIOR VICE PRESIDENT - SALES AND MARKETING
10 MOMENTUM
RESEARCH & DEVELOPMENT LEAD TO COMPETITIVE EDGE
Innovation has always been an integral part of Spirit
AeroSystems. From day one, Spirit has made significant
investments in research and development to gain intellectual
property and create competitive advantage.
“As a result, the company is not just a commodity provider,
but has a unique advantage and technological edge. The goal is
to ultimately lower costs and offer a more competitive product,”
said Bill Smith, intellectual property manager.
CREATING A BRANDSpirit’s technology development activities were recently given
a brand: ShadowWorks. It’s a name that conveys a significant,
long-term investment in the company’s development of new
aerospace product and process technologies. ShadowWorks is
not a subsidiary or organization; employees from many different
functions support technology development projects, and that
makes them all part of ShadowWorks.
Some of the areas ShadowWorks is involved in include
product areas such as composite fuselage, metallic fuselage,
nacelles, pylons, and wing structures. Other areas in the
technology spectrum with ongoing initiatives include modeling
and simulation, chemicals, manufacturing control systems,
dimensional technology, product definition, composite materials,
and robotics.
PARTNERING FOR SUCCESSSpirit AeroSystems’ ShadowWorks recently completed the
build and delivery of a Vacuum Assisted Resin Transfer Molding
(VARTM) aircraft fairing to Lockheed Martin. The fairing is part of
Lockheed Martin’s Advanced Composite Cargo Aircraft (ACCA)
project.
In October 2007, the United States Air Force Research
Laboratory (AFRL) awarded a contract to Lockheed Martin that
authorized the defense contractor to proceed with
Phase II of the ACCA Flight Demonstration
project.
Under the contract, Lockheed
Martin will build and flight-
demonstrate an X-Plane
type aircraft with
emphasis
on
innovative
structural
configurations
and concepts
to include
advanced
prototyping and
composite technologies. Its solution involves
replacement of the mid/aft fuselage and empennage of a Dornier
328J aircraft with advanced composites.
Spirit was asked to participate on the project by building one of
the composite fairings utilizing innovative composite technology.
The ShadowWorks team chose to manufacture one of the upper
composite fairings using VARTM technology.
VARTM is a composite manufacturing process in which dry
fibers are laid on a tool and vacuum sealed, and the resin is
drawn through the component with a vacuum pump. There are
several advantages to using the VARTM process: lower
DEVELOPING NEWTECHNOLOGY
spiritaero.com 11
Above: The composite fairing the ShadowWorks team manufactured for Lockheed Martin using VARTM technology.
costs, one-sided tooling, room temperature processing, and the
potential for high production turn-around just to name a few.
Spirit’s ShadowWorks team delivered the VARTM fairing to
Lockheed Martin in December 2008. The VARTM fairing project
was an opportunity for Spirit to forge a relationship with one of
the largest defense contractors in the world and to showcase
their composite technology.
“It has been a great experience working with and developing a
business relationship for Spirit with the world’s largest defense
contractor,” said Jeff Buxman, project lead for the ShadowWorks
team.
SIGNIFICANT PROJECTSOther recent ShadowWorks initiatives include the development
of processes for automated riveting and painting equipment for a
business jet customer, the development of a laminar flow nacelle
configuration that will provide a significant reduction in drag,
and the development of new titanium machining techniques that
have the potential to reduce machining times by 40 percent.
The ShadowWorks core group is comprised of research and
development engineers, analysts, and technicians who perform
research and development work full time. Additionally, many
employees from all different organizations and disciplines
support ShadowWorks projects.
Spirit employees working on ShadowWorks projects have
submitted more than 230 invention disclosures, resulting in 34
patents filed with the United States Patent and Trademark Office.
12 MOMENTUM
COMMUNITY SPIRIT
SPOTLIGHT ON WICHITASpirit employees and groups within the company participated
in the Salvation Army’s Adopt-A-Family program. Employees
had the option to sign up for a traditional family match or make
contributions to a specific child or children in the family. More
than 200 children and 140 adults received assistance because of
the generosity of Spirit employees.
Heartspring, an agency serving children with disabilities,
invited Spirit employees to Adopt-A-Classroom again in 2008.
Employee groups adopted eight classrooms and hand-delivered
personalized stuffed stockings to each child.
Spirit provided a corporate sponsorship for the Wichita
Symphony’s Holiday Concert, held in December. Employee
volunteers assisted with tickets and donations at the door. Nearly
2,000 people attended the concert, which was a benefit for the
Kansas Food Bank.
Additionally, Spirit employees held a site-wide toy drive. The
drive collected hundreds of toys which were distributed by the
Salvation Army to children in need.
SPOTLIGHT ON U.K.Nine employees from Spirit Europe took part in a 240-mile
cycle race across Ireland in 2008 raising funds for Macmillan
Cancer Support - the employee-selected charity for the 2008/2009
sponsorship year.
A total of £5,889.12 was raised and the donation was handed
over to Jan Forrest from Macmillan who said, “This very generous
gift will be used to enhanced the care available for people living
with cancer, provide support for their families and expand the
resources available for Macmillan nurses, doctors and other
professionals involved in the delivery of this care.”
“U Can Do It 2” is the advertising slogan used by the Ayrshire
Chamber of Commerce for their East Ayrshire Secondary School
Roadshow.
For the third year running, Spirit Europe was among several
local organizations who supported this event by providing
workshops for students between the ages of 13 and 14.
During six workshops, students received an overview of
Spirit AeroSystems, information on career opportunities and
participated in an aircraft design simulation exercise.
SPOTLIGHT ON OKLAHOMA Spirit employees in Oklahoma were able to help their local
food bank receive $100,000 worth of fish products from Chicken
of the Sea. The tuna fish, salmon, and ahi was delivered in
January as the result of a local citizen winning a national jingle
contest. The contest winner had pledged to donate the food to
the Community Food Bank of Eastern Oklahoma.
Since Spirit is heavily involved with this particular food bank,
employees were encouraged to vote daily for the winner of the
contest so the local food bank would receive the donation.
“We already supported the food bank with volunteers and cash
donations,” said Mark Walker, Spirit community relations. “‘It
takes a village’ is how we viewed the opportunity, and with the
help of Spirit employees it was successful.”
EMPLOYEES RESPOND TO NEEDS IN THEIR COMMUNITIES
spiritaero.com 13
Page 12, left: Spirit employees in Oklahoma volunteer at the Community Food Bank of Eastern Oklahoma.Above: Spirit employees in Wichita generously donated many boxes of toys to the Salvation Army.Below, left: Spirit Europe cyclists present a check to Macmillan Cancer Support.Below, right: Spirit Wichita employees handed out employee-made stockings to children with disabilities at local agency Heartspring.
14 MOMENTUM
4TH QUARTER 2008 RESULTS
Spirit AeroSystems reported fourth quarter and full-
year 2008 financial results Feb. 5 reflecting solid operating
performance, the unfavorable impact from the Machinists’ strike
at Boeing, and a lower pension income forecast that unfavorably
impacted the company’s contract accounting estimates.
Spirit’s fourth-quarter 2008 revenues were $646 million and
operating income was $28 million, as the combination of the
Machinists’ strike at Boeing and a lower pension income forecast
for the remainder of the contract blocks impacted financial
results for the quarter.
Despite the strike and pension impact in the third and fourth
quarters of 2008, full-year 2008 revenues were $3.772 billion
and operating income was $406 million. Increased production
volumes during the first eight months of 2008 and lower period
expenses for the year were more than offset by strike-related
reduced deliveries to Boeing in the third and fourth quarters of
2008.
“Our 2008 results reflect a successful, yet challenging year,”
said Jeff Turner, Spirit president and CEO.
“We increased production rates early in the year, made good
progress on development programs, strengthened and matured
customer relationships, and maintained our strong operating
performance across the company while managing through the
challenges of the Machinists’ strike at Boeing during the third
and fourth quarters of 2008,” Turner said.
“Our strategy remains solid and the company is financially
strong as we move into less certain times in the commercial
aerospace market. We are working closely with our customers
and monitoring developments across the industry as we look
forward into 2009 and beyond.”
Net income for the fourth quarter of 2008 was $20 million,
or 14 cents per fully diluted share compared with $76 million,
or 54 cents per fully diluted share, for the same period in 2007.
Full-year 2008 net income was $265 million, or $1.91 per fully
Production continues on Boeing Next-Generation fuselages at Spirit’s Wichita, Kan., facility. The 6,000th 737 fuselage is scheduled to be shipped to Boeing in late February 2009.
spiritaero.com 15
STOCK WATCHThe charts below show the stock price of Spirit compared to the S&P 500 index, the S&P 500 Aerospace and Defense index, and other aerospace companies. Prices/values are plotted as an index number. The base date for the price/values is Nov. 21, 2006, the date Spirit became a public entity. Each data point represents the end of a trade day.
Spirit vs. other U.S.-based aerospace suppliers
Comparisons:4-WEEK, Comparison since SPR IPO
Price/value as of
1/310/09 Price/value as
of 1/02/09PercentChange
Price/value as of 11/21/06*
PercentChange
Four-week Comparison Comparison since SPR IPO
TIER 1 AEROSPACE SUPPLIERSSPIRIT
BoeingGoodrichHexcelHoneywellPrecision Cast PartsRockwell CollinsUnited TechnologiesU.S. STOCK INDEXESS&P 500S&P 500 Aerospace and DefenseIndex* SPR IPO price, all others closing price as of 11/21/06
13.60
42.3138.66
8.2932.8164.9537.6847.99
825.88
268.82
10.81
45.2539.71
7.7334.6663.4040.8054.95
931.80
284.46
26.00
91.1045.1317.0142.9275.4659.6865.83
1,402.81
375.67
25.8%
-6.5%-2.6%7.2%
-5.3%2.4%
-7.6%-12.7%
-11.4%
-5.5%
-47.7%
-53.6%-14.3%-51.3%-23.6%-13.9%-36.9%-27.1%
-41.1%
-28.4%
diluted share compared with $297 million,
or $2.13 per fully diluted share for 2007.
Fourth quarter and full-year 2008 net
income benefited from the federal research
and experimentation (R&E) tax credit’s
retroactive extension, which reduced the
fourth-quarter 2008 tax expense by $8
million, increasing fully diluted earnings
per share by 6 cents per share.
During the third quarter of 2008, Spirit
responded to a labor strike at its largest
customer, The Boeing Company.
The work stoppage by the International
Association of Machinists and Aerospace
Workers (IAM) resulted in Spirit taking
immediate action to implement a reduced
work week schedule for certain employees
supporting most Boeing programs, which
remained in effect throughout the fourth
quarter of 2008. As a result, fourth-quarter
2008 ship set deliveries to Boeing were
63 units below pre-strike delivery levels,
resulting in a revenue reduction of $451
million and a reduction in earnings per
share of 28 cents.
The 2008 full-year impact of the strike
resulted in 72 fewer deliveries, resulting in
a revenue reduction of $504 million and a
reduction in earnings per share of 41 cents
per share.
The company’s backlog at the end of
2008 was $31.7 billion, up 20 percent from
year-end 2007.
The complete fourth-quarter 2008
and full-year 2008 financial results can be
accessed from the Spirit external web site’s
Investor Relations page at
www.spiritaero.com/investor.aspx.
Spirit vs. stock indexes and other aerospace suppliers
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