Boeing CEO Bemoans Trump’s Air Force One Deal After Charge
Boeing CEO Bemoans Trump’s Air Force One Deal After Big Charge
(Bloomberg) -- Boeing Co. shouldn’t have taken up former President Donald Trump’s demand to lowball its pricing on the next Air Force One fleet, the planemaker’s top boss said Wednesday.
“Air Force One, I’m just going to call a very unique moment, a very unique negotiation,” Chief Executive Officer Dave Calhoun said on a call to discuss quarterly earnings. The deal struck with the administration involved “a very unique set of risks that Boeing probably shouldn’t have taken.”
Boeing’s defense business recorded a $1.27 billion accounting charge in the first quarter for cost overruns on the presidential aircraft fleet and other fixed-price contracts. Calhoun said that Boeing has abandoned its former strategy of undercutting rivals to gain defense franchises by bidding near or below estimated costs.
Trump crowed about the hard bargain he’d driven when the Pentagon acquired two never-delivered 747-8 aircraft originally intended for a defunct Russian customer. Retrofitting already built airplanes with missile defense systems, nuclear-hardened communications and bespoke cabins has proved challenging for Boeing.
Work dragged behind schedule as Boeing battled a prime contractor in court. Calhoun, who was not CEO when the deal was struck but was on Boeing’s board, said the company had faced shortages of workers with security clearances during recent Covid waves, a common issue for defense contractors. And a quarterly filing Wednesday also cited “higher costs to finalize certain technical requirements.”
The company stands to lose at least $1.14 billion modifying the two presidential aircraft, a contract worth $4.3 billion, according to the filing. And inflation could drive the overruns even higher.
“Risk remains that we may be required to record additional losses in future periods,” Boeing said.
The company’s tone has shifted from 2018, when it tweeted that Trump “negotiated a good deal on behalf of the American people.”
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