Business CEO: Boeing Should Have Rejected Trump’s Air Force One Deal - Trump saved the taxpayer billions by getting Boeing to agree to pay for any cost overruns in addition to a lower price

BY MARCUS WEISGERBER GLOBAL BUSINESS EDITOR APRIL 27, 2022 12:02 PM ET


A model of the proposed paint scheme of the next generation of Air Force One is on display during a meeting between U.S. President Donald Trump and President Sergio Mattarella of Italy in the Oval Office of the White House October 16, 2019 in Washington, DC. GETTY IMAGES / ALEX WONG

Boeing should have rejected then-President Donald Trump’s proposed terms to build two new Air Force One aircraft, the company’s CEO said Wednesday.

Dave Calhoun spoke Wednesday on the company’s quarterly earnings call, just hours after Boeing disclosed that it has lost $660 million transforming two 747 airliners into flying White Houses.

“Air Force One I'm just going to call a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn't have taken,” Calhoun said. “But we are where we are, and we're going to deliver great airplanes.”

Then-President Trump, an aviation enthusiast, took a keen interest in the new presidential jets, involving himself in everything from contract negotiations to the plane’s color scheme. As part of the deal, Boeing signed a fixed-price contract that required the company, not taxpayers, to pay for any cost overruns during the complicated conversion of the two airliners.

Then-Boeing CEO Dennis Muilenburg, who was dismissed in December 2019, personally negotiated the Air Force One terms with Trump at the White House and the former president’s Mar-a-Lago club in Florida.

In February 2018, the Air Force signed a nearly $4 billion deal with Boeing to convert two 747-8 airliners into a VIP configuration with conference rooms, sleeping quarters, communications gear, and amenities that allow the president to work as if he were at the White House. Along with other costs related to building the planes—for instance, a new hangar complex at Joint Base Andrews just outside of Washington—the Air Force One program is expected to cost taxpayers $5.3 billion.

When the deal was finalized, the White House claimed Trump’s negotiations saved taxpayers $1.4 billion. Boeing’s struggles to build the new planes might in fact save taxpayers more than that when the planes are finally delivered.

Company officials say their problems include a dispute with a subcontractor and the kind of coronavirus-related supply-chain and workforce issues being experienced across the defense and aerospace sector. Boeing blamed the most recent $660 million loss on “higher supplier costs, higher costs to finalize technical requirements and schedule delays.”

The Air Force’s fiscal 2023 budget proposal said the new planes might not be ready to fly a president until at least 2026.

Source (Archive)

 

[Fomo Hoire]

Meh, I wouldn't put it past them to not have saved more in some special tax status that they're conveniently not mentioning here.

Also how is the reaction to this "we shouldn't have done it" instead of "we should get better at predicting our budgetary requirements and be more realistic"?

Software development / the games industry has crunch time, I'm sure other fields similarly have scenarios where they don't plan things perfectly and need to sink more effort than planned into a project. The normal response is not "we shouldn't have done this at all".

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In February 2018, the Air Force signed a nearly $4 billion deal with Boeing to convert two 747-8 airliners

after Boeing disclosed that it has lost $660 million transforming two 747 airliners into flying White Houses.

That's ~ 16.5% over budget, for poorfags like me who can't think in terms of millions and billions of dollars.

I suppose it will get worse as the project draws on, but also, surely they already accepted the project with some space to make a profit? I can't imagine they'll accept to do any at cost unless they get benefits elsewhere, such as tax breaks.

 

[quaawaa]

Meh, I wouldn't put it past them to not have saved more in some special tax status that they're conveniently not mentioning here.

Also how is the reaction to this "we shouldn't have done it" instead of "we should get better at predicting our budgetary requirements and be more realistic"?

Software development / the games industry has crunch time, I'm sure other fields similarly have scenarios where they don't plan things perfectly and need to sink more effort than planned into a project. The normal response is not "we shouldn't have done this at all".

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That's ~ 16.5% over budget, for poorfags like me who can't think in terms of millions and billions of dollars.

I suppose it will get worse as the project draws on, but also, surely they already accepted the project with some space to make a profit? I can't imagine they'll accept to do any at cost unless they get benefits elsewhere, such as tax breaks.

My guess is they have a corporate culture of spending as much money as possible and billing it all to the government, and a culture like that can’t be easily changed when you get a fixed price contract. I suspect that is Trump probably got them to agree to a price first, which they agreed to thinking that they could just bill the government for “””overrruns”””, and then he slipped in a requirement for it to be fixed price. Hence the complaining about losing money. Also, they are spending $2 billion per plane to outfit the plane; the actual plane already exists. That seems an absurdly high amount.

 

[kcbbq]

My guess is they have a corporate culture of spending as much money as possible and billing it all to the government, and a culture like that can’t be easily changed when you get a fixed price contract. I suspect that is Trump probably got them to agree to a price first, which they agreed to thinking that they could just bill the government for “””overrruns”””, and then he slipped in a requirement for it to be fixed price. Hence the complaining about losing money. Also, they are spending $2 billion per plane to outfit the plane; the actual plane already exists. That seems an absurdly high amount.

Airforce Ones have crazy levels of stuff bolted on to do their job, plus a large amount of countermeasures and hardening. They're the hub of a network of command and control aircraft that mirror the oval office and various presidential bunkers in case of nuclear war.

It's not just a fancy wooden desk and nice table.

 

[updoot farmer]

Huh, so a dude that knows how to negotiate, negotiated a sweetheart deal with Boeing.

Fucking awesome for him.

PS. If you ever have to negotiate anything with a contractor, always negotiate fixed price and see if you can build in protections for yourself like this. If you are a contractor, always ALWAYS fucking negotiate to do the project billing for time and materials, fixed price is literally cancer.

 

[RadicalCentrist]

My guess is they have a corporate culture of spending as much money as possible and billing it all to the government, and a culture like that can’t be easily changed when you get a fixed price contract. I suspect that is Trump probably got them to agree to a price first, which they agreed to thinking that they could just bill the government for “””overrruns”””, and then he slipped in a requirement for it to be fixed price. Hence the complaining about losing money. Also, they are spending $2 billion per plane to outfit the plane; the actual plane already exists. That seems an absurdly high amount.

No. What usually happens is the money comes from Congress, who are in on the scheme as well, fully aware of how much taxes are coming in to their district (and their pockets.) This was with the president, who not only lost the electrion and thus his personal stake in it, on top of a supply chain disaster (Not to mention Boeing was still reeling from the 737 Max debacle.)

 

[XANA]

Not surprised the company CEO is regretting this.

On paper, building Air Force One seems to be a relatively straightforward job, since the plane will be used for a few decades afterward and they most likely don't have to build more than 1-2. It was probably going to be used as a selling point to the public in terms of the new technology they were going to show off, as well as popularizing the brand in the US to recover their public image.

In practice, there will almost always be cost overruns, since the projections made are overoptimistic in terms of development and manufacturing times. This is especially true due to the shipping snafu that is going on recently, and the fact that Boeing no longer manufactures almost everything in-house and instead relies of already-assembled parts to be flown/shipped over to the final assembly plant. Plus, there probably has to be additional redundant systems on the plane, especially in the line of communications and anti-aircraft defenses (eg: there are flares that can be deployed in order to protect the craft from missiles).

 

[TowinKarz]

So lemme get this straight..... you didn't read the fine print in a business contract that Donald effin' TRUMP wrote?

And are shocked the terms are favorable to his side?

Oh well, this is the company that turned the 737 into a crash-0-matic by cheaping out on designing new flight control software by hiring Pajeets who could barely do mobile games right and then not QC testing it..... are you surprised?