After meeting with President-elect Donald Trump at his Mar-a-Lago resort in Florida, Boeing CEO Dennis Muilenburg says he’s making a “personal commitment” to keep the cost of the next two Air Force One jets below $4 billion.
“We’re going to get it done for less than that, and we’re committed to working together to make sure that happens,” Muilenburg told reporters on Wednesday.
In addition to the Air Force One debate, Boeing has gotten involved in a tangle over Lockheed Martin’s controversial F-35 fighter jets.
The back-and-forth with Trump began with a tweet on Dec. 6, in which the president-elect threatened to have Boeing’s Air Force One deal canceled because “costs are out of control, more than $4 billion.” Since then, Muilenburg and other executives have smoothed over the dispute. Wednesday’s meeting in Palm Beach appeared to cement the rapprochement.
Muilenburg told reporters that he had a “terrific conversation” with Trump. “Got a lot of respect for him. He’s a good man, and he’s doing the right thing,” Muilenburg said.
Trump told reporters that “we’re looking to cut a tremendous amount of money off the price.”
In fact, Boeing has never referred to the total cost of the project, and $4 billion has been toward the high end of outside estimates. The only firm figure that’s been agreed to so far involves a $170 million contract to develop the requirements for the two beefed-up Boeing 747-8 jets.
Like the current Air Force One planes, the future planes will have to be modified with equipment for in-flight refueling, radiation hardening, secure communications, anti-missile systems and other features that most 747s don’t need. The specifications are subject to negotiation, and Boeing could conceivably work with the Pentagon to fit the requirements to the budget.
The Air Force has set aside $2.87 billion for the project through the 2021 fiscal year, but there may be other costs between 2021 and the planes’ expected deployment in the 2021-2024 time frame. In March, the Government Accountability Office estimated costs in the 2010-2020 time period at $3.21 billion.
Also on Wednesday, Trump met at Mar-a-Lago with Lockheed Martin CEO Marillyn Hewson, with the costs of the Lockheed Martin-led F-35 fighter jet program high on the agenda.
“Trying to get the costs down. … Primarily the F-35, we’re trying to get the cost down. It’s a program that’s very, very expensive,” Trump said.
The F-35 program has suffered through a series of development problems and delays, boosting the total price tag for thousands of the jets to close to $400 billion.
Lockheed Martin has said it’s working hard to reduce costs, and in a statement released after Wednesday’s meeting, Hewson said she “appreciated the opportunity to discuss the importance of the F-35 program and the progress we’ve made in bringing the costs down.”
Trump told reporters that the discussions over the F-35 were “a little bit of a dance.”
“But we’re going to get the costs down, and we’re going to get it done beautifully,” he said.
Yet another twist was added to the dance on Thursday, when Trump tweeted that he asked Boeing to provide a price for a comparable F/A-18 Super Hornet fighter jet:
Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!
— Donald J. Trump (@realDonaldTrump) December 22, 2016
An hour after Trump’s comment, Boeing tweeted that it was open to discussing the options:
Ready to work with @realDonaldTrump's administration to affordably meet U.S. military requirements.
— The Boeing Company (@Boeing) December 22, 2016
Today, Lockheed Martin tweeted that Hewson and Trump had a follow-up conversation about the F-35s, during which the CEO gave her “personal commitment to drive the cost down aggressively.” (Where have we heard that before?)
LM CEO just had a good conversation with @RealDonaldTrump… she personally committed to drive down the cost of the F-35! pic.twitter.com/K2aK7pW07f
— Lockheed Martin (@LockheedMartin) December 23, 2016
Boeing lost out to Lockheed Martin when the Pentagon made its original choice for the F-35 (also known as the Joint Strike Fighter or JSF) back in 2001. At the time, Lockheed Martin’s X-35 design was considered less risky than Boeing’s X-32 proposal.
Defense tech analysts said Boeing’s standard-issue F/A-18 Super Hornet doesn’t have all the capabilities of the F-35.
“Despite similarities, the two warplanes are not ‘comparable,'” DefenseOne’s Marcus Weisgerber wrote. “The F-35 is a stealth fighter, meaning it is built to avoid radar detection. To stay low-profile, the F-35 carries its bombs and missiles inside the jet, not outside on the wings like the Super Hornet. The F-35 also has an advanced computer system that processes data from a host of cameras and sensors.”
However, Weisgerber noted that Boeing has been marketing an “advanced Super Hornet” that has some of the F-35’s high-tech, low-profile capabilities.
In the wake of Trump’s tweet, Lockheed Martin’s share price dropped nearly 2 percent on Thursday, to $248 in after-hours trading.
The price went through ups and downs today and ended up slightly higher at the close ($249.59). The after-hours price edged further upward in reaction to Lockheed Martin’s statement about Hewson’s follow-up.
Boeing’s shares ended the week at $157.81, which represents a rise of almost 4 percent since Dec. 6.
