Brian Bradley
NS&D Monitor
5/15/2015
Boeing’s CEO this week played down concerns that the unsuccessful pursuit of the new Long-Range Strike Bomber could have significant impacts on the company. “There’s enough technology and we regroup and regrow organically,” Boeing CEO Jim McNerney said during a May 12 investor conference. Developed through Boeing Commercial Airlines (BCA) and Boeing Defense, Space & Security (BDS), Boeing’s industrial base would remain at scale, McNerney said, while BDS would downsize. It “would not be dramatically smaller than it is, but it would be smaller than it is today,” he said. “We would not overreact and feel that we had to get big again right away, because we’ve got BCA. We’ve got this great aerospace company and BCA, arguably the strongest business within the aerospace industry. And so, we don’t have to panic.”
Northrop Grumman is competing with a Boeing-Lockheed Martin team to win the contract for LRSB, an aircraft estimated to cost $44 to $55 billion to produce. The Air Force plans to procure 80-100 LRSBs at a cost of $550 million apiece. Richard Aboulafia, Vice President of Analysis at the Teal Group, told NS&D Monitor last month that a Northrop win could translate to Boeing downscaling to a mostly commercial jetliner company. While several recent media reports have explored the idea that the LRSB contract could reshape the combat aircraft industry, McNerney was the second industry official in two weeks to deflate that prediction. Northrop CEO Wesley Bush has said LRSB would be one of several projects in that company’s portfolio if his company won. “It would just be one more part of a very diversified portfolio that we have in our corporation,” Bush said during his company’s earnings call for the first quarter of 2015, adding that he would “be careful” about prognosticating any reshaping impact the contract award would have on the industry. “No single program is out there driving us in a direction,” he said.
Despite Proposed Budget Cut, LRSB Production Proceeding on Schedule
Maj. Gen. Garrett Harencak, Air Force Assistant Chief of Staff for Strategic Deterrence and Nuclear Integration, said this week that the Air Force plans to build adaptability and upgradeability into the LRSB, and added that the Air Force wasn’t concerned about a proposed reduction in authorized funding levels for long-range strike capabilities in the unclassified portion of the program’s budget. The House version of the FY 2016 defense authorization bill would authorize a funding level that is $460 million below the Obama Administration’s $2 billion request. “This happens in every weapons system, every major weapons system,” he said during an event in Washington. “We move money from one system to another.”
Harencak expressed confidence the program would remain on track despite the proposed cut. “I think there will be years where we’ll move money in the future, the near future, from something else to help the long-range strike bomber at a time when it’s most beneficial to do it,” he said. “So I would not read anything into that. This program is, in my view, going exceedingly well. We’re meeting our milestones. Everything is progressing well. We’re not concerned by that at all.”
LRSB to Go Nuclear Shortly After IOC
Harencak said the Air Force will certify LRSB for nuclear capability shortly after initial operating capability (IOC) is reached, and said that capacity was included in the service’s $550 million-per-unit estimate. The service has stated it plans to declare IOC in the mid-2020s. But Harencak added that if the Air Force approaches modernization the same way it has in the past, the acquisition process will face difficulties. He mentioned skeptics’ concerns that the United States would be able to buy the LRSB at the service’s stated estimate, given that B-2s were procured at a “high price tag.” The Air Force procured 21 B-2Ss at a cost of $737 million per plane in 1997 dollars. While Harencak defended the cost of the B-2 in relation to the deterrence he said it provides, he said the Pentagon needs to do bomber acquisition better than past programs, emphasizing that the Pentagon is using an “agile acquisition strategy” to ensure LRSB hits cost and schedule targets. “B-2s, at whatever cost you come up with at unit cost, and there’s wild numbers out there, it doesn’t matter. It’s well worth it,” he said. “The B-2 has been a bargain for America. Trust me. And those of you who know what the B-2 has done and continues to do, and will do well into our future, it is a bargain. We only built 21 of them, and it is a huge bargain.”
‘Better, Faster, Cheaper’
Harencak said the Air Force Secretary, Assistant Air Force Secretary (Acquisition), and Chief of Staff are committed to acquiring the LRSB “better, faster, cheaper,” than previous bomber acquisitions. “Hold us accountable when we say we’re going to control requirements and we’re going to get it done, and we’re going to get it done at the cost we said we’re going to get it done,” he said. “We have to do it. Everybody understands it, because it’s absolutely vital to defend America.”
Harencak used a cell phone analogy to describe the transition from aging military equipment to today’s smarter technology, recalling that 1990s cell phones were “as big as this podium.” A cell phone he bought 20 years ago cost $550, while an iPhone 6 his wife bought this year didn’t cost anything, he said. “I mean, I had to get a two-year agreement, I think, but I was going to do that anyway,” Harencak said. “I mean, you can’t do without a cell phone…. It has more computing power than some of my airplanes. Why is that possible, but we can’t use the great innovation of our industrial base and the great brains to do the same thing? We can and we will.”
