Boeing Names New Defense Chief, Drops Bomber Challenge

When the Government Accountability Office (GAO) last week rejected the appeal from Boeing Co. (NYSE: BA) and Lockheed Martin Corp. (NYSE: LMT) related to the awarding of an $80 billion contract to Northrop Grumman Corp. (NYSE: NOC) for the new Long Range Strike Bomber, the two companies said they planned to consider their options. That didn’t take long.

Reuters on Thursday cited a source who said that Boeing officials have told the U.S. Air Force that the company will take no further legal action to challenge the award to Northrop.

Boeing already has taken some action though. On Wednesday the company named Leanne Caret as the chief executive officer of its defense and space division, effective March 1. Current division CEO Chris Chadwick took over just two years ago when Dennis Muilenburg, now CEO of the company, was moved to the chief operating officer position under former CEO Jim McNerney.

Chadwick, 55, is retiring after 34 years at Boeing.

Losing an $80 billion contract can be a career-limiting issue. Caret, who is 49, has spent 28 years at Boeing and is currently heading the defense division’s global services and support group. Caret has also served as the chief financial officer of the defense division and as vice-president and general manager of the helicopter business.
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There can’t be much question that the change at the top of Boeing’s defense and space division stems from the loss of the bomber contract. Boeing won the new tanker contract after a decade-long struggle with Airbus, and the new bomber was the last of the massive new Air Force contracts for the next few years, at least. Boeing has had to write-off $1.3 billion on that tanker over the past two years, which probably didn’t improve Chadwick’s standing, nor did declining revenues.

Boeing has teamed up with Saab in a bid for a new training jet for the Air Force, but that contract is unlikely to be anywhere near the same size. Raytheon Co. (NYSE: RTN) entered the field for the new training jet last week with partner Alenia Aermacchi. Other entrants are Northrop Grumman, with partners BAE Systems and L-3 Communications Holdings Inc. (NYSE: LLL), and Lockheed and partner Korean Aerospace.

The Air Force is expected to publish a request for proposals later this year and award a contract in 2017 with an initial operational capability deadline of 2024. The contract is expected to require about 350 of the new trainers to replace the existing T-38 fleet.