By John T. Bennett - 08/09/11 11:46 PM EDT
U.S. military spending is on the way down, but the executive who oversees a key portion of Boeing’s defense business sounds almost bullish about the future.
“The companies in defense — or any industry — that are performing well with known commodities will come through this the strongest,” Chris Chadwick, president of Boeing Military Aircraft, said in an interview. “I wouldn’t trade the BMA portfolio for any of my competitors’ portfolios at this point.”
“We’ve got a number of very strong, mature product lines — F-15, F-18, Chinook and Apache [helicopters], the V-22, a lot of our weapons — that position us extremely well,” Chadwick told The Hill.
“And it’s balanced because we have two of the three major franchises of this decade, P-8 [surveillance aircraft] and [KC-46] tanker. Lockheed has the other, with F-35.”
A hubbub erupted on Capitol Hill and around Washington after the White House and congressional leaders struck a debt-ceiling accord that calls for $350 billion in cuts for the Pentagon and other national security entities over 10 years. Defense officials said that level of reduction is more than doable.
But the pact could also set off around $600 billion in additional cuts for the military and other security agencies, should the new joint “supercommittee” fail to reach a deficit agreement that passes Congress.
Defense Secretary Leon Panetta recently called cuts of nearly $1 trillion “dangerous.”
Defense industry executives have remained largely quiet about the effect of cuts that large, but one insider said it would hurt many companies.
If defense and national security cuts reach $1 trillion, “that really would be the end of the world for many defense players,” Loren Thompson of the Lexington Institute wrote this week in a Forbes.com blog post.
That likely would not apply to Boeing’s thriving military aircraft division, Chadwick said.
“We’ve seen this coming for several years,” he said, while acknowledging “it will be a very trying time.”
Boeing’s military aircraft unit has taken steps to branch out into emerging markets, including unmanned combat aircraft.
That looks like a wise move. A new Teal Group study concluded that unmanned aerial vehicle builders will continue to make big money from drone sales, even in a down global defense market.
“The market will [more than] double over the next decade from current worldwide UAV [research and development] and procurement expenditures of about $5.9 billion to $15.1 billion,” the report stated.
Chadwick’s division is expected to compete for what could be a multibillion-dollar contract to build new bombers for the U.S. Air Force.
He said the firm has had productive talks with the Air Force about selling it P-8 aircraft to replace an aging class of surveillance planes. Boeing is trying to convince the service that buying P-8s, designed initially for the U.S. Navy, would be cheaper than putting new engines on the existing planes — while also giving the Air Force a more capable fleet that would last longer.
What’s more, the unit’s military helicopter business is strong, with Chadwick saying “if I could build more Chinooks, I could sell them — that’s how hot it is.”
Boeing also builds the V-22 tiltrotor with Bell Helicopter.
A V-22 program official recently told The Hill that Boeing and Bell are in early talks with a number of U.S. allies — including Israel — about selling the Osprey transport aircraft to their militaries.
Still, though military commanders and personnel who are using the V-22 fleet in Afghanistan rave about its performance, the program was often delayed and came in substantially over budget. That places it near the top of any weapons program cut list.
The V-22 is not the only high-profile American weapon system drawing interest from abroad.
As the overall and per-unit costs of the Lockheed Martin-made F-35 fighter continue to rise and its delivery date slips, more nations that have committed to buy it are taking a new look at Boeing’s F/A-18E/F Super Hornet fighter, Chadwick said.
The often-delayed and over-budget F-35 is being built for three U.S. military services and nearly 10 U.S. allies.
The U.S. Navy already has bought more Super Hornets in recent years as a hedge against ongoing F-35 problems, and a growing number of the U.S. allies involved in its development are having “quiet discussions” with Boeing about following suit, Chadwick said.
A spokesman for Lockheed Martin disputed the suggestion that foreign buyers are souring on the F-35.
“Italy, Australia, the United Kingdom, Turkey, Canada, Norway, The Netherlands and Israel have run competitions and ... selected the F-35,” Mike Rein, Lockheed’s director for F-35 communications, told The Hill. “They all have made financial commitments to the program.”