August 18, 2020 | International, Aerospace
CEO of Boeing’s defense wing talks stumbling blocks, from KC-46 to COVID
By: Valerie Insinna WASHINGTON — When Boeing Defense, Space and Security CEO Leanne Caret dials into our hourlong interview on Aug. 4, she comes prepared with 15 minutes worth of opening statements that include thoughts ranging from the company's performance during the coronavirus pandemic to the state of the KC-46 tanker program. She knows she has a lot to cover, and a lot to answer for. Caret stepped into the top Boeing defense job in 2016, after the American company lost a lucrative contract for the U.S. Air Force's next-generation bomber. Questions about Boeing's future as a producer of fighter jets — and the prominence of its defense business — lingered as the end of the F-15 and F/A-18 production lines loomed in the near future. Now the tables have turned. With COVID-19 devastating the travel industry and eradicating near-term sales opportunities for commercial airliners, Boeing's defense sector finds itself as the company's model pupil. “One of the questions that I get a lot is, how has that changed the expectations for me and for our defense and space business?” Caret told Defense News. “And I wanted to just anticipate the question and share that, you know, as I see it, the company's expectations of our business are the same as always. We need to perform consistently, and we need to perform well. And while our progress may be viewed through a different lens for a period of time, the expectations of how we do our job and what we deliver haven't really changed.” Under Caret's leadership, Boeing has logged a number of major wins, including contracts for the T-7A trainer jet and the Grey Wolf helicopter for the Air Force, as well as the Navy's MQ-25 drone. New orders for a block upgrade of the Super Hornet aircraft resuscitated that production line, and in July the company got its first order for the Air Force's F-15EX jet. “I mean, how many people a few years ago would have placed a bet that we'd be building new F-15s? I say, few to none,” she said. But amid this progress, the company has met stumbling blocks. Most prominently, the KC-46 has been hampered by a list of technical issues, including foreign object debris found in the jets and a dispute with the Air Force over the camera system that allows the boom operator to refuel other aircraft. A deal on a fix for the latter problem was agreed to in April after more than a year of negotiations. “I think we've turned the corner. I really do,” Caret said. “What I want you to know from me is I want every KC-46 delivered to be perfect. We're not there yet. But we're aligned with the Air Force, and our road map is sound.” This interview with Caret was edited for length and clarity. The COVID-19 pandemic is still ongoing, and there could be a second wave approaching. With that in mind, what is the health of Boeing's defense business? Where are you seeing challenges? It's not unique to Boeing, but our workforce — think about this — they have masks on, safety glasses, bump caps, vests, gloves, 6-feet proximity. This environment that they're working in, it's just hard. We are still right in the middle of the pandemic. You'll see states that have different protocols. From a Boeing Company position, our goal is to make certain that our employees are safest at work. Click here to see the Defense News Top 100 list. One of our biggest lessons learned is the quick benefit you can have from minimizing contact and quarantining. So when a case is identified, we do an entire trace of where the individual has been so that we can quarantine those who are potentially at risk, and then also make certain that they have the ability to go get the testing. Every employee, we've made sure they have thermometers and masks as we continue to bring folks back in. We're making certain that we have lots of really great cleaning details, and folks just focused on easing the anxiousness of our teams because day in day out this is really hard. As you talk about the fall and the worry about the flu — we don't have a vaccine yet for COVID, and then you are dealing with the compounding effects of schools not being in session. We have not had a respite from this. How is the health of your second-tier suppliers and below that? Are you concerned there could be delays in getting parts, components or subsystems that Boeing needs as we head into the fall? We've already seen delays. Think about what we went through in both Mexico and India. We have suppliers in both of those countries. And again, this is not unique to Boeing. As they were going through their shutdowns and their quarantines, it impacted, many times, their production rates. And so that is where we have really a great cross-sharing of information occurring. One big focus for us has been making sure we've been aggressive in making certain that they have cash flow, they have liquidity. We've actually hosted events with the Small Business Administration for our supply base. On one level, it's making certain that we help them get what they need. We also adjust how we do business so it makes it more efficient. A great example of that is how we're doing virtual inspections now. We have teams go out and inspect parts and do different things like that. We now do them with videos and cameras so that we don't slow the supply base down. Anywhere where we can do advances and allow our supply base to do advanced delivery, we're doing that as well. What's been the impact of pauses at your defense production lines in Puget Sound, Washington, and Philadelphia, Pennsylvania? Will Boeing be able to deliver all of the military aircraft that was the books for 2020? So for instance, with the Army, we actually did slow down the pace of Apache [attack helicopter] final assembly due to some supply chain impacts resulting from COVID. And most of those came from our efforts with our JV [joint venture] with [Indian defense company] Tata. But there is some realism in what you're talking about. Now, I'm not seeing drastic changes at this point. But to your earlier point, we haven't gotten to the fall yet. So we're all being very pragmatic. We're being very cognizant of prioritizing what our customers need and making certain that we can support them. And then we just assess it on a case-by-case basis. And I'll defer to the services to let them publish any changes that have been agreed to or not. Is the worst over for Boeing's defense business, or is there concern that a second wave of COVID-19 could cause a more dramatic impact? I mean, let's be honest: If nothing else, we know the flu always hits hard in the fall/early winter time frame. So there's a compounding effect there. And so we are planning for another resurgence, but we have the benefit of what we've already been through, and a disciplined approach for how we manage it. That's really going to aid us. I'm not going to predict, other than to say we are better positioned now to handle a resurgence than we were when the thing first started. Under your leadership, there was a realigning of some of Boeing's business divisions involved in the defense sector. But given that the operating environment has changed, do you anticipate more restructuring or changes in leadership? I think any good leader always looks at: Do you have the right structure for the business environment and for the market? And we made some very specific decisions when I first came into this role about flattening the organization, taking out layers, reducing. We were extremely top heavy. We eliminated a lot of that. I feel very comfortable. I'm not predicting anything significant. Do you expect an impact on foreign military sales because of the global economic downturn or because countries are trimming defense spending? Absolutely. The industry is already seeing that nations have been affected by spending on COVID similar to the U.S., and they're having to go look at their timelines. We have not seen any cancellations. But we have seen some acquisitions and some contracts pushed to the right. Now, you also know that many of our international deals take — you know, they're years in the making anyways. But I think it's only pragmatic for us to look at it through the lens that they're going to face the same pressures the U.S. does in terms of spending decisions. And so that's why we really need to be flexible and we need to be innovative. Over the past few years, Boeing has bid very aggressively on a number of defense programs like MQ-25 and T-X. Considering Boeing's commercial business now faces a number of financial challenges, was that a bad move? What sort of impact will that have on Boeing as a whole over the next couple years? Will Boeing continue to employ the same bidding strategy? I actually remain very confident in the investments we made on both the MQ-25 and the T-7. There was a lot of commentary back at that time about how much we invested. We had already redesigned, reimagined, how are we going to use advanced modeling and simulation and digital twins. And so those investments, in terms of how we design and build, I think have paid off not only for those programs you mentioned, but for the F-15EX for the air power teaming system and for everything that follows. It wasn't just about the bid. We evolved ourselves in terms of how we did the work, not just the offering. And that was really the true differentiator. I think that enabled us to win. Going forward, I think you will see — as we're delivering these aircraft and additional orders come in — that it was exactly the right thing to do. So the investments Boeing made in advanced manufacturing processes and digital engineering make you confident these programs won't be a repeat of the KC-46 program? It is my goal to never have a repeat of tanker, and that was the headset that I've gone into with pretty much every decision that we make. It started with how we design and how we build, to your point, and how we sustain over the long term. We had to go prove out those advanced technologies, and we spend our investment dollars wisely to be ready to go pursue this. So these are not the same; these programs aren't even in the same ballpark. With flight testing ongoing for an interim version of the KC-46′s remote vision system, called RVS 1.5, when do you expect the Air Force to make a decision on adopting that? We're still waiting for that. They participate in the flight testing. As a matter of fact, we had [then-Chief of Staff of the Air Force] Gen. [Dave] Goldfein out in Seattle. He was with me just a couple of weeks ago. We're getting real pleased with the feedback. I think you've heard [Air Force acquisition executive] Dr. [Will] Roper's comments about it, and [he's] really pleased with the path that we're on. But that'll be an Air Force decision, and so I will defer to them on that. The Air Force will award a Ground Based Strategic Deterrent contract in August, and Boeing did not bid because of complaints with how the competition was run. Is Boeing still looking at its legal options? Is it considering a protest? We made the decision to not bid on GBSD due to what I was concerned about with the process, and I'll just leave it at that. What do you see as the sales potential for F-15EX? We are already getting inquiries. We're very excited, and they are nations that you would not be surprised about. Are you satisfied that the Navy is committed to MQ-25? What kind of future do you see for that program? We're absolutely thrilled with the partnership with the U.S. Navy. And you probably saw that in April they increased the quantity to a total of seven. So we're well on track to what we were working with in our assumptions when we bid on the program. We have completed nearly 30 flight hours to date, and what [Assistant Secretary of the Navy for Research, Development and Acquisition James] Geurts saw while he was out there [at MidAmerica St. Louis Airport in St. Clair County, Illinois], was the aerial refueling store already mounted under the wing of the aircraft. As as we get back into flight testing later this year, we'll be able to collect more performance data. https://www.defensenews.com/top-100/2020/08/17/ceo-of-boeings-defense-wing-talks-stumbling-blocks-from-kc-46-to-covid/