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Boeing (NYSE: BA), which has come under criticism from Pentagon officials over delays to the KC-46 refueling tanker, is revamping its defense unit in a bid to better manage the tanker and other weapons programs and improve its reputation.
Boeing Defense CEO Leanne Caret, in an email to employees first reported by Defense One, said that the company next week will stand up two new divisions focused on commercial derivative aircraft and missiles and weapon systems. It will also eliminate a development unit created in 2015, changes that she said "refine our structure around our core markets, common missions and priorities, and position us to deliver."
A Boeing KC-46 tanker refuels an F-16 mid-flight. Image source: Boeing.
Focus on the KC-46
The move comes just weeks after Air Force Secretary Heather Wilson issued a rare public rebuke of the contractor, complaining before the House Armed Services Committee that Boeing seems to be overly focused on its commercial cash cow to the detriment of defense projects.
The first batch of tankers, originally slated for delivery last August, are now supposed to arrive before year's end, but Air Force officials have expressed concern that the timetable will slip into 2019. The Pentagon says there are still major deficiencies that must be worked out before deliveries can begin, including issues with the tanker's remote-vision system that have caused the refueling boom to scratch fighters.
"One of our frustrations with Boeing is they're much more focused on their commercial activity than on getting this right for the Air Force, and getting these aircraft to the Air Force," Wilson said, adding that Air Force officials held face-to-face meetings with Boeing in recent weeks about the KC-46, and that "we have asked them to put their A-team on this to get the problems fixed."
The commercial derivatives unit, which will be based in Seattle, would seemingly address Wilson's criticism and show that the company is devoting necessary resources to the KC-46 project. The tanker is a derivative of the 767 commercial model, and the new unit will be led by Tim Peters, a former KC-46 program manager.
Not a knee-jerk reaction
A Boeing spokesman told Defense One that the revamp has been under consideration for several months and was not prompted by Wilson's criticism. Regardless, investors and the Pentagon alike should be glad to see Boeing taking steps to get the KC-46 on track.
Boeing has already taken more than $2 billion in pre-tax charges due to fines and cost overruns on the tanker program, and is on the hook for all development costs over the $4.9 billion agreed to in the original contract.