A T-7A Red Hawk trainer from the 416th Flight Test Squadron takes off from St Louis Lambert International Airport (Boeing)
WASHINGTON – Boeing’s defense business is “core” to the company, its new CEO said today, in a sign that the embattled aerospace giant will not pursue a full sale of its defense segment as executives consider a revamp of the company.
Kelly Ortberg, who took over as chief executive in August, said he is conducting a review of Boeing’s portfolio with the aim of narrowing the company’s focus and improving execution.
“Obviously our core commercial aircraft and defense systems will stay with Boeing for a long time, but maybe there are some things on the edge that we can be more efficient with, or that just distract us from the goal.” our main here. ,” he said on an earnings call this morning.
“I think we’re better off doing less and doing it better than doing more and not doing it well,” he said, adding that the goal is for Boeing to understand what it sees as a non-business essential until the end of the year. year.
Analysts had speculated whether Boeing would sell some or all of its defense unit, known as Boeing Defense Space and Security (BDS), as it looks to improve its balance sheet, face a quality and safety crisis at the unit. its commercial aircraft and station. reducing ongoing losses in defense programs.
Last month, Boeing announced the departure of Ted Colbert, who had led the defense unit since 2022, with BDS Chief Operating Officer Steve Parker taking over in an interim role.
In mid-October, the company disclosed $2 billion in losses for the defense unit during the third quarter on fixed-price programs, including the KC-46 tanker and T-7 trainer aircraft. At the same time, Ortberg announced layoffs of 17,000 employees, a move aimed at “resetting workforce levels to align with our financial reality and a more focused set of priorities,” he said in a letter to employees then.
The sweeping changes come as Boeing deals with an ongoing strike by its Seattle-area machinists union, which has affected production of its best-selling 737 MAX jet, as well as defense assets such as surveillance planes. naval KC-46 and P-8. (The union will vote on whether to end the strike and accept a new contract with Boeing later this evening.)
Asked if Boeing will replace Colbert with an executive from outside the company, Ortberg was dismissive.
“We will take a look inside, do we have the right candidate? And if so, that’s the way we’re going. If we need to supplement from abroad and bring in some skills from abroad, then she will lead that direction,” he said. “I’m certainly not against bringing in some extra resources to help the team and I don’t think teams are averse to that either.”
Since the COVID-19 pandemic, Boeing’s defense unit has been plagued by cost overruns from fixed-price defense contracts, where the company is responsible for covering all costs above an agreed-upon level. As pandemic and inflationary pressures drove up the cost of materials and wages, the planemaker has struggled to keep losses under control.
Ortberg acknowledged that there is no “magic bullet” for Boeing’s fixed-price programs, which will take time to become profitable.
“Having said that, the discipline around what we can control in those contracts needs to be improved,” he said, adding that Boeing’s defense unit has not done enough work with its customers to keep program risks from develop into a potential cost overrun.
“That’s what I’ve focused the team on doing a lot more: a lot more deep dives, a lot more deep look at the programs, a lot more cornering. [and] not just dealing with what’s going to be today’s problem,” Ortberg said.
Boeing must also ensure it enters future contracts with a clear picture of a program’s risk, and its defense unit leadership must work more closely with its engineering and factory workforce to better understand problems as they arise. are born, he said.
“I want to be a leader in the aerospace and defense market,” he said. “I want to set the standards for the products we offer. I want our customers to do our marketing for us.”