Headline: Boeing CEO Reaffirms Commitment to the Defense Sector
Boeing's CEO Kelly Ortberg acknowledged the ongoing challenges in the company's defense sector, emphasizing its significance for the company's future despite recent financial losses and operational difficulties. On Wednesday, Ortberg stated that the defense business, responsible for helicopter, fighter jet, and missile production, remains the "core" of Boeing's strategy despite struggling with budget overruns on older contracts.
On the same day, the aerospace giant reported a $6 billion quarterly loss, alongside a 1.76% drop in shares. This loss was attributed to various factors, including a five-week strike and production issues. Boeing's Defense, Space & Security unit is currently seeking a new CEO following the departure of its previous leader last month. The unit has faced significant challenges, including over $7 billion in cost overruns with the KC-46 aerial refueling tanker program and a $2 billion loss from the upgrade of two Air Force One aircraft.
Technical issues and development delays have also affected Boeing's Starliner spacecraft, leading to cost overruns exceeding $1.8 billion. This situation resulted in reliance on rival SpaceX for the return of two NASA astronauts from the International Space Station, as Boeing was unable to provide an alternative transportation. Additionally, the company faces pressure to reduce expenses on its NASA Space Launch System rocket contract, which is over budget and behind schedule.
In an earnings call with analysts, Ortberg emphasized the need for improved management and discipline within the company. He suggested that Boeing might withdraw from some ongoing defense contract competitions to focus on profitability. In the third quarter alone, cost overruns on several Air Force contracts, including the new Air Force One and training jets, contributed to the defense unit's $2 billion loss.
Boeing is currently negotiating the sale of its rocket-launch joint venture United Launch Alliance with Lockheed Martin and has earmarked its Insitu drone business for divestment. The company recently sold its Digital Receiver Technology business to Thales SA for approximately $100 million. However, sources indicate that despite the urgent need for cash, the management team is too preoccupied and understaffed to expedite divestitures or prepare other units for sale.
Amid these challenges, Ortberg aims to stabilize the company by the end of the year. The Boeing Defense, Space & Security unit's portfolio includes military aircraft such as F-15 and F/A-18 fighter jets, Apache and Chinook helicopters, the KC-46 tanker, and various space and satellite systems. Boeing has not provided an official comment on the divestiture process.