Thursday, November 3, 2016

Boeing's Military Division is Fraught With Risk and Reward Termoil

You don't have to look far until analyzing the Lockheed F-35 program before corporate America is adverse to the risk of winning a bid with the military. Building military equipment is impregnated with a whimsical Military objective. Build the "moon shot" for the military and hope a military fluid and dynamic condition won't impose a penalty on the contractor. The F-35 program did not reach a military satisfaction bench mark early on as the F-35 couldn't even fit an advanced technology helmet on its pilots without a major re-write of programs and capabilities.

Boeing, knowing that corporate investors would love to have a sure bet with military contracts are jumpy when the DoD does a 180 degree course change when it firms up a contract. They call for a stealthy war bird when in fact they are looking for an invisible aircraft after-all. The battle field has changed during the long and drawn out bid process which brings up another crucial point.

Will funding be voted upon during the different stages and maturation of a new military project? The US Congress weighs in on simplistic notions for gaining any sense about whether it should release more billions of dollars after a program reaches the rock and hard place point of development. The F-35 was just awarded the 9th block of 5th generation fighters with only having a 57 block grant from congress. Years in the discussion for the 9th and 10th block authorization has the Congress imposing its will of only awarding Block 9 and ignoring block 10. Lockheed is breathless over this imposition of award and that after the last two years working for a contract allotment of the F-35 next batches.

Boeing watches every little nuance between the military, congress and the awardee. Lockheed got smoked by politics when promised so much at the onset of the F-35 program. However, this is only a speed bump towards building 2,400 F-35 going forward. The 57 F-35's in Block 9 are low production rate aircraft as Lockheed fixes its “moon shot” technology along the trail of program completeness.

Boeing is out of the Moon Shot business for investor’s sake. It is taking a position during the remainder of this decade for mitigating any far reaching risk until program production pays for the last ten years of risk making from its commercial programs, hence a cautious approach on anything military until it can absorb more risk without damaging stock portfolios from around the world. Lockheed is the pilot hole for all military programs going forward. Timing, maybe right for Boeing to partner with either Northrup, Lockheed or itself for 6th generation fighter development on a large scale. Technology sharing is needed for 6th generation ideas.

Subcontracting with "others" can either increase or mitigate risk depending on program complexity. In fact partnering makes the mess too complex for a successful futuristic program unless new purchasing methods are used for conforming the product without inconsistent contribution of all players. Boeing will remain tepid on future military opportunity since the risk is too high for any military rewards obtained at this time.