Filed under: Boeing Co (BA)
The New York Times reports that Boeing Co. (NYSE: BA) has lost a $40 billion deal for airborne tankers that refuel fighter jets for the Air Force. The winning suppliers are Northrop Grumman (NYSE: NOC) and EADS, the parent of Boeing’s arch rival, Airbus.The deal, which puts a critical United States military contract partially into the hands of a European company, calls for spending up to $40 billion to replace the Air Force’s aging aerial tanker fleet of 535 Boeing 707s and DC-10s.
This comes as a major blow to Boeing. Its CEO, James McNerney, had been brought into his position in 2005 to clean up the company after several significant ethics problems — including a deal to hire the Air Force’s second ranked weapons buyer, Darleen A. Druyun, her daughter and son-in-law in return for steering the tanker contract and billions of dollars of other Air Force business to Boeing. Soon after joining Boeing at a $250,000-a-year post, Druyun and Michael Sears, Boeing’s former CFO, pleaded guilty in the scandal and received prison terms.
Since I am working on a book on Boeing, I was very focused on this contract award. A win would have been a big benefit to shareholders after McNerney’s efforts to cure Boeing of its ethics problems. The loss of this contract — which could total $100 billion — is a big setback.
Boeing’s stock fell $2.01 during the market today and an additional $2.68 after hours.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.
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