If the early reports are correct, the Boeing Co. and the U.S. Justice Department will announce today that they’ve finally settled the long-running investigation into the company’s shady dealings with government contracts.
The settlement could very well mark the end of a series of embarrassing and costly ethics scandals for the company, said Loren Thompson, a defense industry analyst with the Lexington Institute.
“What we’re seeing here,” he said, “is the Boeing Co. sending a message that it is determined to put the era of controversy and distractions behind it – even if it costs a half-billion dollars or more to do so.”
Boeing will pay a record fine to settle the charges – $615 million, The Associated Press reported – but will face no criminal charges and admit no wrongdoing.
Yet I think everyone at Boeing would acknowledge that dangling a high-paying job in front of Pentagon purchasing officer Darleen Druyan was exactly the wrong thing to do.
If the original tanker deal – the one proposed in Congress in December 2001 – had gone through, Boeing workers in Everett would be busy building 767s for the Air Force right now.
Under that original $20 billion proposal, Boeing would have built the first six KC-767s in Everett in 2004, and after being modified in Wichita, Kan., they would have been deployed to Fairchild Air Force Base outside Spokane last year.
The rate would have picked up after 2004, and the plan was for Boeing to be building 20 tankers a year by 2006.
At the time, Boeing said the deal would secure jobs for more than 2,000 of its workers, plus another 5,000 or more at key suppliers around the country.
Instead, the deal was delayed by political wrangling and then scuttled when it was revealed that Druyan had thrown an extra billion dollars or two in Boeing’s direction, in return for a high-paying executive job.
The tanker scandal came on the heels of revelations that a Boeing executive had stolen key documents from Lockheed-Martin. That led the government to withhold $1 billion in rocket contracts from Boeing.
The combination was a serious hit to the bottom line, and even more damaging to Boeing’s image.
Boeing tried to repair the damage under former chief executive Harry Stonecipher, who launched a high-profile ethics initiative – and then had an affair with a subordinate that got him canned.
But Boeing may have gotten it right by replacing Stonecipher with Jim McNerney, Thompson said.
McNerney brought with him a reputation for being “unflappable, focused and very disciplined,” Thompson said.
The new chief assessed the problems, developed a plan and executed it, he said. Boeing reorganized its Integrated Defense Systems business, which had been at the center of the two scandals; entered a joint rocket venture with Lockheed-Martin, defusing a potential lawsuit; and pursued today’s expected “umbrella” settlement with the Justice Department, which should end the government investigations.
The settlement, if it does come today, won’t magically bring back the tanker deal, or the lost Everett jobs. Congress and the Pentagon have a limited budget and a lot of projects that require big dollars, noted Teal Group analyst Richard Aboulafia.
And even if the money is there for tankers, this time, Boeing will have to compete with Airbus to win the order, he said.
But the settlement will go a long way toward removing the political hurdles, Aboulafia said. “It’s not going to do anything to hasten any tanker contract, but it can save them from having arrows fired at them.”
Thompson said he’s seen several large defense contractors go through procurement scandals. Each has come out of it so traumatized that they become “hyper-moral.”
He suspects that’s what will happen with Boeing. In fact, it may already have happened.
Today “there is less controversy surrounding the Boeing Co. than at any time in the past five years,” Thompson said. He laughed. “I know, that’s kind of like saying there’s less shooting in Baghdad today.”
For more aerospace news and analysis, see Bryan Corliss’ Web log at www.heraldnet.com/ blogaerospace.
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