Boeing's defence business is proving harder to turn around than executives initially predicted, with supplier errors and high manufacturing costs contributing to $1.7 billion in losses this year on programs like the next Air Force One and NASA's Starliner capsule, reports Valerie Insinna from Reuters.
Despite absorbing $4.4 billion in losses in 2022 – which executives said would lower the risk of future cost overruns – the unit has seen little improvement this year. Excluding last year, losses on Boeing's defence programs in 2023 exceed those from all years since 2014, according to a Reuters review of Boeing’s regulatory filings.
Boeing is unique among its defence contractor peers, as companies like Lockheed Martin, General Dynamics and RTX are seeing higher revenues due to demand from the war in Ukraine. Unlike those companies, however, Boeing is locked into a handful of contracts that force the planemaker to take a loss when technology development goes over budget. The defence unit's losses this year include $933 million in charges in the third quarter, mostly comprising a $ 482 million loss in building two Air Force One planes and a $315 million charge on an unidentified satellite program that had not previously lost money.
Boeing's executives said they are putting in place new training and deploying resources to suppliers to ensure the unit moves from negative margins to high-single-digit margins by 2025-2026, when its most troubled programs are slated to be past flight testing and on more stable footing.