Boeing CEO Dave Calhoun says the company’s deal with Trump to build Air Force One was a risk the company “probably shouldn’t have taken.” The comment was made on Wednesday during a conference call to discuss the company’s first quarter results for 2022, which show the Air Force One program exceeded its budget by $ 660 million in recent months. In a financial document (PDF), Boeing reports that it has now lost $ 1.1 billion on the contract.
“Air Force One I’ll just call it a truly unique moment, a truly unique negotiation, a truly unique set of risks that Boeing probably shouldn’t have taken, but we’re where we are and we’re going to deliver great airplanes. And we will recognize the cost associated with it, ”says Calhoun.
In 2018, Boeing struck a deal with then-President Trump to develop and build two new Air Force One airplanes for a fixed price of $ 3.9 billion. According to Acquisition.gov, a fixed-price contract is one in which the contractor (in this case, Boeing) is paid the same for a project, regardless of the costs and, potentially, the losses.
The new deal came after Trump threatened (via tweets, of course) to cancel the previous government order of Air Force One as a cost-cutting measure in 2016. The original project is estimated to have ranged between $ 4 and $. 5 billion. The new deal also shifted the timing to build the plane: according to CNN, Trump wanted it done by 2021, rather than 2024.
Boeing didn’t stick to that timeline, which isn’t all that surprising. Ever since that deal was made, the company has been rocked by the 737 Max scandal (which resulted in its CEO, Dennis Muilenburg, being fired and replaced by Calhoun), not to mention a global pandemic.
Calhoun said during the phone call on Wednesday that COVID-19 has been particularly difficult for the company’s work on the new Air Force One. “In the world of defense, when a COVID line goes down or a group of workers goes out, we don’t have a whole group of people authorized to put themselves in their shoes,” he said, noting the “very high” security clearances required to work on it. plane of the president. “We have just been beaten in several areas.”
He also noted that he did not want to take on additional fixed-price contracts and had a “very different philosophy” than the company’s previous CEO.
Calhoun says that, as far as government contracts are concerned, Boeing had a “messy neighborhood” largely due to the Air Force One project. “You will remember that it was a public negotiation that took place a long time ago. We took risks not knowing that COVID would come and not knowing that an inflationary environment would take hold as it did. “
Politic reports that Boeing now plans to deliver the first Air Force One in 2024 and the second aircraft the following year. CNBC, however, reports that it may be delayed further and Boeing’s financial statement says it may continue to lose money on the project.
The history of CNBC also includes a Tweet 2018 from Boeing which defines the project (which, once again, is now over a billion in the hole) an “exceptional value for taxpayers”. The tweet also says that “President Trump has negotiated a good deal on behalf of the American people.” But here’s a question: If Boeing is taking heavy losses on the project and writing them off its taxes, is the general public really better off for the purported savings?
Boeing is proud to build the next generation of Air Force One, providing American presidents with a flying White House at exceptional taxpayer value. President Trump has been negotiating a lot on behalf of the American people. pic.twitter.com/m0HtGfXVlv
– The Boeing Company (@Boeing) February 27, 2018
One final note: $ 2 billion per plane is still an incredible amount of money. Do you know how the F-35 is famous for being obscenely over budget, with the expected final price being around $ 1.6 trillion? So far, Lockheed claims to have made around 800 of those planes, which means that each currently costs around $ 2 billion, though that figure will decline as more planes are produced.
As my colleague Andrew Hawkins pointed out, however, Boeing’s Air Force Ones are likely to be very advanced and able to dodge missiles and survive nuclear fallout and EMPs – there’s a cost to return, as he puts it, ” the ultimate resilient, high-tech, rigged jumbo jet in existence.
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