Boeing (BA) has agreed to buy Spirit AeroSystems (SPR) in a $4.7B all-stock deal as part of an effort to improve quality and safety. However, Boeing is still under fire from the US Department of Justice for violating FAA regulations.

Boyd Group International president Mike Boyd and former Wall Street Journal aerospace reporter Andy Pasztor join Morning Brief to give insight into how the purchase will affect Boeing's operations.

"I think after this deal comes down, probably [Boeing CEO] Calhoun will see the front door. He should have been kicked out the door before him. He is responsible for this. Hopefully we will see an improvement at the FAA. They're responsible for the oversight. And they they failed before the Max. Now they failed since the Max," Boyd tells Yahoo Finance.

Separately, Pasztor points out that Boeing will only face a small penalty for its 737 Max crashes despite pressure from victims' families: "The reason [a greater penalty] isn't happening is because of the chaotic days of the end of the Trump administration, the agreement that Boeing signed with the Justice Department in 2021 essentially poisoned the well for any strong, forceful action by the Justice Department in a very clear break from Justice Department practices over the years, the Justice Department said it found no evidence specifically that senior executives were involved in any of the potential fraud related to the to the Max design. The Justice Department almost never does that."

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Nicholas Jacobino

Video Transcript

Now Boeing announcing it will by Spirit Arrow Systems and a $4.7 billion deal.

That's in an effort to improve quality and safety according to the company.

And this comes as us, prosecutors are reportedly seeking a guilty plea from Boeing over allegedly misleading a federal regulator about the 737 max planes that were involved in those two fatal crashes.

According to several reports.

For more on this, we're joined by Mike Boyd Boyd Group International president.

We're also joined by Andy pastor, former aerospace reporter for the Wall Street Journal.

Thank you both so much for joining us this morning, Mike.

I want to start with you to just get some context here for our viewers.

What do we know about this agreement from Boeing to buy the fuselage maker Spirit Arrow systems here?

And what do we know about the potential impact that could have on Boeing in the stock price?

Well, I think it's a, it's a diversion.

Number one, Boeing is having a hard enough time handling their own own production.

Buying back Spirit isn't a guarantee of nothing other than Boeing be managing it.

It has to be more than that again, you know, to charge Boeing with criminal uh malfeasance by the government is sort of like a, a fire alarm company suing a building for having had a fire.

Uh We're in a situation here where Spirit is Spirit and there's no guarantee that Boeing will be able to manage it any better than they can manage their own operations.

Andy, I wanna get your read in on the situation.

I mean, especially as we're and have been tracking spirit aerosystems with direct correlation to this acquisition and what we were anticipating from Boeing and, and Airbus as well, which also announced that they were purchasing the division of Spirit at least that has a little bit more manufacturing for its own aircraft.

So I I think the important thing to keep in mind is, first of all, this is a, this is a reversion to some policies that Boeing had many years ago where all of this work would have been kept in house.

So they basically reversed course in that way.

But I'd like to talk a little bit about this potential criminal um plea plea agreement.

It's really a slap on the wrist for Boeing.

It's a miniscule fine of about 250 million, which of course is, is almost as a pittance for a company that has spent billions, millions and billions trying to um make changes and recoup from the, the the two crashes.

And it's important also to understand that the families and the vic, the victims of the families of the victims and their lawyers have been demanding much harsher action from the, from the justice department larger fines, criminal proceedings against individual Boeing executives.

The reason that isn't happening and this isn't been talked about very much.

The reason that isn't happening is because of the chaos.

The chaotic days of the end of the Trump administration, the agreement that Boeing signed with the justice Department in 2021 essentially poisoned the well, for any strong forceful action by the justice department.

In a, in a very clear break from justice department practices over the years, the justice department said it found no evidence specifically that in that senior executives were involved in any of the potential fraud related to the to the to the max design.

The justice department almost never does that they simply don't charge individuals.

They don't explicitly say that there's no evidence against anyone because someone walks in with a box of documents the day after.

Of course, the whole question becomes um becomes much different.

So I think that this is a slap on the wrist.

It's almost a symbolic punishment.

Boeing has been immune to such symbolic punishments over the years.

But the reason I think that the justice department isn't being more forceful, has a lot to do with the fact that they were locked into a certain legal position by the Trump administration years ago in 2021 and they simply can't go back and essentially relitigate and try to create a new criminal case from, from those facts.

So Andy really quickly, what does a potential Trump re-election mean for Boeing Su?

I don't think it has any effect at all.

This agreement if it comes to pass will be a, a done deal in a matter of um, days or maybe a week or two.

The ju it'll have to be proved by a judge, the families of the victims will complain vociferously.

But by um, the middle of the summer, late in the summer, this will be a moot point.

The, the Trump administration won't be able to legally intervene and try to change any of these issues.

The Trump administration, if there is one will be able to make major decisions about regulating the company, about overseeing its production, about what happens on the production line and so on.

But in terms of this legal settlement relating to the previous crashes, I don't think that the Trump administration will be involved whatsoever, Mike, what do you need to see from Boeing in order to believe that there's been a significant cultural shift internally at the company?

Well, I think after this deal comes down, probably Calhoun will see the front door, he should have been kicked out the door before.

I mean, he is responsible for this.

Hopefully, we will see a new improvement at the FAA.

They're responsible for the oversight and they, they failed before the max.

Now they failed since the max.

But the big thing is there'll be a symbolic uh basically kicking him through the, the goalposts of Boeing and getting rid of Calhoun who they replace him with.

I don't know, but Boeing can't sit any longer like this acting like they're doing things when they're not going forward.

I think Boeing will have to have a totally different management and I do think this legal activity will probably force the rubber snap board to do something.

I wanna stay with you here, Mike.

Uh Obviously there's been a lot of discussion about any potential new CEO to come in at Boeing.

Uh Is there a name that you have not heard discussed that you think potentially has a chance of getting that ce or would be open to it, given so much volatility that that executive would be inheriting.

It's a very tight what they should hire is somebody who's very tight, who knows some engineering knows some of it, but also knows how to re re re rebuild a company.

I mean, the problem with Boeing is they, they inherited people from mcdonald Douglas who didn't know anything.

They inherited a whole bunch of people from GE which are, which were really good at tearing companies down rather than building them.

So I think it's gonna be a very hard thing to find somebody.

I think there's someone out there.

I don't have a name but it has to be somebody who wants to go in there and not be a rubber stamp and does understand that Boeing needs a whole new product line in five years.

They're gonna be in a world of hurt because they haven't invested.

That's what we really need.

Mike Andy.

Great to see you.

Thanks so much for joining us this morning, Mike Boyd Boyd Group, International president and Andy pastor who is the former aerospace reporter for the Wall Street Journal.

Great to see you.