Posted on 10/26/2022 5:11:53 PM PDT by algore
Boeing revealed on Wednesday that its losses on its contract to build two new planes to act as Air Force One have hit $1.9 billion.
Then-President Donald Trump negotiated a fixed price of $3.9 billion for the presidential planes, leaving Boeing to foot the bill for anything over that amount.
'We didn't get enough price,' Boeing Chief Executive Dave Calhoun told CNBC, adding the 'biggest mistake' on the Air Force One 'was the fixed price nature' of the contract.
He said the defense company would take a $766 million loss this year on the contract. Boeing previously booked about $1.1 billion in losses - bringing its total cost to $1.9 billion for constructing the planes.
The contract is also three years behind schedule.
The new Boeing 747-8s, which are being modified into flying White Houses, aren't expected to fly until 2026 and 2027.
There needs to be two planes as there is always a backup for any presidential travel. The distinct blue-and-white Air Force Plane carries the call sign 'Air Force One' when the president is on board.
Boeing said the losses on the contract were 'driven by higher costs to incorporate certain technical requirements, increases to factory modification labor and support engineering, schedule delays and higher supplier costs
(Excerpt) Read more at dailymail.co.uk ...
The age of an airframe is unimportant. As long as they are maintained, and the AF1 twins are to a fault, there’s no reason they can’t fly another 40 years.
Boeing rips off POOR SUFFERING AMERICAN TAXPAYERS, courtesy of an "unable/unwilling to make a deal" government!
Why settle for the deal when you can get Biden and his goons to give you much more with the obvious 10% percent for the big guy because well, we need the plane you know?
I would guess that the technology in the electronics are old and have been upgraded many times. Computers were in their infancy when they were built.
Boeing could have delivered the plane almost within cost before the COVID pandemic shut down work in Seattle and at their supplier facilities. This stretched out the schedule for over a year while still having to pay for the employees who were sent home.
The added time also increased their borrowing costs and, coupled with the supply chain delays for chips and engines, dramatically drove up the costs with inflated prices. Also, design changes ordered by the Biden Administration ran up the tab.
Boeing’s only mistake was not predicting that the country would be shutdown for a pandemic before agreeing to a fixed price contract. It was a smart business decision since it guaranteed they would keep the rest of the Air Force business from a veto by an unhappy President Trump.
More than that for an A350 or A380.
By the time 2024 hits, we won’t be manufacturing a whole hell of a lot in America anymore.
The oldest trick in the book when dealing with the government is to bid low then hammer the government with overruns.
Boeing has been on my sh_t list since agreeing to build a assembly plant in China with the stipulation that Boeing turn over the plant and all technology after building a fleet of passenger jets for them. Used to be that China had the numbers but we had superior technology. Now they have that and matching piloting skills being taught them by Western ex-pats too.
Boeing has been on my sh_t list since agreeing to build a assembly plant in China with the stipulation that Boeing turn over the plant and all technology after building a fleet of passenger jets for them. Used to be that China had the numbers but we had superior technology. Now they have that and matching piloting skills being taught them by Western ex-pats too.
I agree. but with the Government, a fix price contract is a short-term item. Bet the day after the contract was signed, Uncle Sam started to change his mind as to what they wanted in the aircraft and told Boeing to make it happen. Of course, the contractor is allowed delay, disruption and growth. All which are negotiable.
The over runs are generally the Government wanting to make changes to the contract as it waw signed. Government wanting to change a portion of the contract allows the contractor to negotiate for delay, disruption and growth.
Yep. Hilarious.
Yep, good chance the project management team was not up to the task. I suspect this extends further up the line to the preliminary engineering team and business team that worked up the cost basis then negotiated the contract, the detailed engineering team that left some oops that resulted in do-overs that were excluded from compensation via contract terms and the business team that negotiated poorly thus had to eat material cost increases out of Boeing's control.
Did Boeing not have to post a performance bond of sorts or decide on their own to cheap out on that cost?
Lots of ways to loose bucks on fixed contracts. The are certain companies in certain industries that do not shy away from fixed contracts. The ones I have some recollection of are big time players in civil engineering construction design-build where they have total control.
A very small number of times when I was working with a fixed price contract, I was able to insert an incentive clause into the contract. When the line is crossed where ownership passes from the builder to the owner, the incentive clause is evaluated. Cost is fixed of course but if the builder comes in ahead of schedule by a specified amount of time, the builder would earn a performance bonus payment. This really keeps the builder on schedule and busting their butt to earn the extra $$$.
I know zip about airplane construction but Prez Trump negotiated a helluva deal on the two base 747s. IIRC, they were at the tail end of 747 construction and the commercial customer canceled the purchase. So, they were sitting on Boeing's parking lot as a depreciating asset and unsold for a time. Boeing could have stopped with the 747 sale but went for the whole package of modifications. They blew it.
My opinions…
Agree completely, that is standard practice in contracting but very stupid and companies can reject and simply not do business with them.
Of course China also just steals designs or reverse engineers them
They also have sources in our political parties — a mess
how show me
That’s tough noogies. Firm, Fixed-price contract on which they had the opportunity to build in factors that would account for increased production costs.
Trouble is they managed it like a cost plus fixed fee contract.
Hold them to the deal - they’ll just make up the loss on other contracts they make.
Yeh, Obama allowed the Boeing deal and Biden has quietly canceled 99% of Trump’s tariffs. Corruption everywhere you look nowadays.
Elon is going to the moon for 5-8 billion. What’s the holdup Boeing?
You’re speaking my language. 😏
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