Boeing executives today defended the company's efforts to win recent programs, just one day after the chief executive of Lockheed Martin hinted the prices they bid might result in losses.
Boeing recently won the MQ-25 unmanned tanker, Huey helicopter replacement and T-X trainer contracts.
However, the contractor announced today that while its defense business achieved quarterly sales of $5.7 billion, up 13 percent from the same period a year earlier, the unit reported a $245 million quarterly loss.
Boeing said it recorded in its defense unit "$691 million of charges related to planned investments in the T-X and MQ-25 programs and $64 million related to cost growth on the KC-46 Tanker program." The company also reported in the quarter $112 million in tanker cost growth in its commercial business; the tanker program has frequently incurred additional charges.
In a call with analysts today, Dennis Muilenburg, Boeing's chief executive, said the company's spending on its newly won programs "reflects a commercial investment mindset."
However, analysts questioned whether the company appropriately bid on the programs, with one pointing to the remarks yesterday of Lockheed Martin CEO Marillyn Hewson, who said her company estimates it would have lost $5 billion if it bid at the same price.
Muilenburg said the company is using a "targeted and very deliberate strategy focused on some key defense franchises that we believe have life cycles that are measured in decades."
"We have taken a look at these in a very careful, diligent way and have invested upfront with a business case that is very strong," he said.
Muilenburg argued Boeing has "significantly derisked these programs," and the charges this quarter are meant to invest in production.
On T-X, "having built those two production-ready flying aircraft . . . that reduces risk in the development program, which makes it significantly different than tanker," he said. "Think of these as investments in a production run that begins in the 2020s and will extend literally for decades."
"It's making a commercial-like investment in a defense program," Muilenburg added
He declined to specifically address Hewson's comments, but said Boeing also benefited from its investments in productivity. "All of these next-generation design, production and support capabilities are being reflected in these new products," Muilenburg said.