NEW YORK – Boeing Co. chief executive Harry Stonecipher said the company hasn’t given up on a deal to supply 767 tankers to the U.S. military, because the military still wants the planes.
The deal has been sidetracked because of complaints about costs and the unconventional way it was structured. It’s unclear when the government will make a final decision on the program.
“The tanker is not dead,” Stonecipher said during a presentation to investors Wednesday. “The customer has not changed (its) mind one iota about wanting the 767 tanker program.
“The moment that the customer says, ‘Hey, Boeing, we’re not interested in this. This is too hard, we quit,’ then we’ll quit,” he said.
Stonecipher pointed out that the reports on the tanker program produced by various government agencies and research institutes haven’t formed a consensus. However, The Washington Post reported Wednesday that a National Defense University report on the tanker program determined that the Air Force did not hold a true competition before beginning negotiations with Boeing on the multibillion-dollar contract for the refueling planes and bypassed the normal acquisition process when developing the program.
The National Defense University is a military education center in Washington, D.C., under the direction of the chairman of the Joint Chiefs of Staff.
The report, which has not been released, reflects earlier criticism by the Defense Science Board, a Pentagon advisory panel and the Defense Department’s inspector general.
Defense Secretary Donald Rumsfeld requested the reports last year after Chicago-based Boeing fired a senior executive, Darleen Druyun, for secretly negotiating and then accepting a job with the company while she was still at the Air Force negotiating the tanker contract. Druyun has pleaded guilty to conspiracy and faces possible jail time. Boeing also fired its chief financial officer, Michael Sears, who recruited Druyun to the company, and chief executive Philip Condit resigned shortly afterward.
The debate centers on the Air Force’s plan to lease and buy 100 tankers, which refuel planes in the air. Sen. John McCain, R-Ariz., said the more expensive leasing option amounted to a bailout of Boeing during a period of slumping commercial airplane sales. Congress limited the number of planes that could be leased to 20, and said the Pentagon would have to buy the rest through the traditional procurement process.
The tanker contract is vital to the survival of the production line in Everett that makes the 767 jet, which has faced dwindling commercial orders.
Rumsfeld was expected to decide on the $23.5 billion program this month, but defense officials have said he is now likely to wait until the end of the year. An Air Force spokesman could not be reached for comment. Boeing spokesman Douglas Kennett said the company has not seen the report, but “Boeing stands ready to resume discussions on how to expeditiously put new tankers in the war fighter’s hands when the Pentagon gives the go-ahead.”
While critical of the Air Force process, the National Defense University report said modernizing the 40-year-old KC-135 fleet will take 30 years and “must begin now!”
Stonecipher said he won’t decide the fate of the entire 767 airplane line based on the tanker contract. “The 767 line will continue. That decision is not going to get made contemporary to the tanker decision,” Stonecipher said. Instead, he said, Boeing will deliver the commercial 767 airplanes on order and will then decide whether to shut down the line.
Last week, Boeing’s head of commercial aviation, Alan Mulally, said he would have to make a decision about shutting down the line in the next few months, based on whether the U.S. military signals it still wants to buy the airplane.
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