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Air Force One lifts off

Boeing CEO: Trump Talks on Air Force One Costs Make Progress

Jan. 17, 2017
Muilenburg: “We discussed Air Force One, we discussed fighter aircraft. We made some great progress on simplifying requirements for Air Force One, streamlining the process, streamlining certification.”

Boeing Co. CEO Dennis Muilenburg said he “made some great progress” in face-to-face talks with Donald Trump on the president-elect’s demand to hold down costs on the next-generation version of Air Force One.

In addition to Boeing’s contract to build the new Air Force One, the main presidential aircraft, they talked in their second meeting since the election about the company’s F-18 Super Hornet, which Trump suggested last month should be upgraded to compete with Lockheed Martin Corp.’s F-35 as the Pentagon’s advanced fighter jet.

“We discussed Air Force One, we discussed fighter aircraft,” Muilenburg told reporters after the meeting Tuesday at Trump Tower in New York. “We made some great progress on simplifying requirements for Air Force One, streamlining the process, streamlining certification.”

Trump has shaken the defense industry — and put all large U.S. companies with government contracts on notice — with his Twitter postings. In a tweet on Tuesday morning, the president-elect boasted of “the massive cost reductions I have negotiated on military purchases,” although no specific reductions have yet been announced.

“I think Mr. Trump is doing a great job of engaging with business,” Muilenburg said after their meeting Tuesday. “We’re on the same page here.”

Although Boeing has announced plans to pare its workforce amid slowing commercial aircraft sales, its CEO touted the economic growth and the 1.5 million manufacturing jobs that the largest U.S. exporter supports: “You want manufacturing jobs — aerospace is the place to invest. We’re proud to take on that mission.”

Trump’s public pressure on Boeing began on Dec. 6, when he tweeted that “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!”

In the wake of that comment, Muilenburg vowed that the Chicago-based company could build a new version of Air Force One for less than $4 billion.

“We’re going to get it done for less than that, and we’re committed to working together to make sure that happens,” Muilenburg said as he left the president-elect’s Mar-a-Lago resort in Florida last month. Muilenburg said he gave Trump his “personal commitment on behalf of the Boeing Company.”

More than a potent symbol of U.S. power, Air Force One planes are outfitted to highly classified specifications, which include secure communications and antimissile defenses, so they can operate as a flying White House in a national crisis. Boeing is currently under contract for $170 million to help determine the capabilities of the complex military aircraft.

Boeing isn’t the only defense contractor that’s felt the fury of Trump’s tweets. Lockheed CEO Marillyn Hewson has met twice with Trump after he attacked the company for “out of control costs” on the F-35 jet, the largest U.S. weapons program. The $379 billion program for more than 3,000 fighters started development in 2001 after Lockheed beat Boeing in the winner-take-all contest. The 200th aircraft was delivered Jan. 11.

Trump also called on Boeing to “price-out a comparable F-18 Super Hornet,” referring to the company’s F/A-18E/F jet, to compete with the F-35, a proposal defense analysts said was probably unworkable given the different roles and capabilities of the two fighters.

After the president-elect’s criticism, Hewson told Trump last week that Lockheed is close to a deal with the Pentagon to lower costs “significantly” on the next and largest production lot yet of F-35s. The push to reduce F-35 costs over time was underscored by Roger Carr, the chairman of BAE Systems Plc, a key subcontractor on the program.

“Over a period there’s no question we’ve been told through Lockheed that the president has an ambition to reduce the cost of that aircraft by a material amount of money, many percent, into double digits over a period,” Carr said in a Bloomberg TV interview Tuesday from Davos. “We respect that and we’ll work towards a contribution towards that.”

At the time of Trump’s tweet about Air Force One, it wasn’t immediately clear where his estimate of $4 billion originated. The Pentagon’s top weapons buyer said in an interview that the president-elect may be taking total acquisition costs and assuming that they are already built into the Boeing contract. On Air Force One and the F-35, “he’s heard these big numbers,” Frank Kendall said in an interview. “Those are often program costs, or maybe acquisition total costs. They’re not contract values, necessarily.

“The basic aircraft is a small fraction of that $4 billion — the 747s we’re buying — so Boeing has part of that cost but not all of that, by any means. We’re still negotiating with Boeing on that.”

Kendall praised the incoming president, who takes office Jan. 20, for his focus on reducing taxpayer expenses on large weapons contracts.

“His general interest in reducing costs is terrific — his focus on that is good,” Kendall said. “But there are a lot of details I think he needs to absorb before he can talk about specific.”

By Tony Capaccio, Toluse Olorunnipa and Julie Johnsson, with assistance from Kevin Cirilli and Benjamin Katz.

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Licensed content from Bloomberg, copyright 2016.

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