June 13, 2013
ST. LOUIS — Boeing’s defense division plans to build on a “One Boeing” strategy to drive cost out of its products and increase the international share of its business, helping to offset the effects of flat or declining U.S. budgets.
“We set a target three years ago to grow our international revenue to 25%,” Boeing Defense, Space & Security CEO Dennis Muilenburg said at a recent media briefing here. “We have now raised the bar to 30%, and we were at 28% in the first quarter of 2013.”
Muilenburg’s mantra is “market-based affordability.” He explains: “It’s not just about reducing costs. What does the market demand? What does a commercial satellite bus need to cost, what does an F/A-18 need to cost, to sell internationally?”
The company is squeezing costs generally, not just at the level of individual programs. Examples of the One Boeing plan in action include completely changing the manufacturing strategy for the KC-46A tanker to build as much as possible of the aircraft in the commercial company, confining defense-division work to the installation of the refueling hardware and other specific systems. “It took out a tremendous amount of cost,” Muilenburg says. Also, the company is working on integrating supply chains so that low-volume defense and space buys can be bundled with high-volume commercial orders.
This means a top-level recognition that Boeing’s combination of commercial and defense business is important, even as commercial growth contrasts with military stagnation. “Ten years ago,” Muilenburg recalls, “we saw rapid growth in defense and a challenging time in the commercial business,” and robust defense sales meant that “we could make the investments we needed to, to build the 787.” Likewise, within Muilenburg’s sector, resurgent satellite orders have cushioned the impact of defense cuts.
Military aircraft remain big business. The largest single new opportunity, the U.S. Air Force’s Next Generation Bomber, is too classified to discuss. Meanwhile, Boeing is energetically promoting new versions of its F/A-18 Super Hornet and F-15 Eagle, exploiting delays in the Joint Strike Fighter program that company people have been privately predicting since 2006-07.
“In the real airplane world, we don’t wait around 10 or 20 years for the latest generation to emerge,” Muilenburg says. “We’re buying new technology every year and we design platforms with the power, weight and cooling capacity they need to accommodate it. We can get the technology into the field, and we know exactly how much the products will cost.”
The Navy’s Unmanned Carrier Launched Airborne Surveillance and Strike (Uclass) project represents a different approach. “It’s very interesting, it’s a force multiplier and it gives us the ability to do long-range ISR and selective strike from the carrier,” Muilenburg says. “We’re investing in technology and prototyping, but we’re not ready to reveal any of our approach.” However, he adds that “while in some of our products the exterior looks the same, a lot of the electronics are new. On Uclass we’ll leverage electronics and systems that are well in hand.”