A version of this article appears in the May 26 edition of Aviation Week & Space Technology.
When Chris Chadwick looks at the defense and space market through the lens of years of budget downturns, he sees several aerospace and defense companies that look the same as ever. His strategy for succeeding in the future hinges on breaking from the pack to create what he calls “true differentiation,” he tells Aviation Week editors.
President/CEO ofDefense, Space & Security (BDS)
Education: B.S., Iowa State University; M.B.A., Maryville University
Career: On Dec. 31, 2013, the same day his former boss Dennis Muilenburg was promoted to COO of the Boeing Co., Chadwick was named to head BDS. Prior to this, he had been president of Boeing Military Aircraft.
AW&ST: What does the strategy of breaking from the pack mean for independent research and development investment? Does breaking from the pack require Boeing to put forward more of its own money?
Chadwick: We have been leaning forward in the defense side, investing more than our competitors in the last few years. As the market deals with sequester, the global rebalancing of social and defense needs, we think it is time to move. You need to be prepared to best position yourself for a lower number of new-start programs. As we go forward, we will continue to do that.
When you talk about differentiation, can you discuss how that will play out, for instance as you work toward trying to win the Navy’s Unmanned Carrier Launch Surveillance and Strike (Uclass) program?
There is not a whole lot I can say about Uclass. You can see this on a couple of different programs. In the past, at times you get this siloed mentality. You have a team doing their best—and over the last three or four years this has been because of Jim McNerney’s push for One Boeing. What it means is the cultural walls have come down. And there is more and more transparency from a horizontal nature, which allows us to leverage technology development, leverage manufacturing development, leverage other investments to play on programs like Uclass, programs like the T-X trainer. We have a different mind-set on how you protect the proverbial cost curve.
You break the cost curve in a couple ways—one is in the design-develop mind-set. It is the right capability at the right cost with a built-in growth path. On the manufacturing side, it is leveraging new technologies. On the supplier side it is getting ahead of the cost curve to work with them in a more seamless fashion from Day One.
About halfway through development of the, it is no secret the company invested to keep the development program afloat. What will Boeing have to contribute to keep the program whole? And how do you reconcile differing cost estimates from the Air Force, the (GAO) and Boeing?
We are still on-plan and committed to delivering the 18 tankers in 2017. That has not wavered at all. In terms of the cost differences, we have talked to the customer. The customer should have an independent view of what they believe our costs are. From Day One we have performed on-cost, on-schedule. That is our commitment going forward. We still plan on having our first flight in the third quarter. The Boeing cost estimate has not changed.
Do you anticipate an international sales push on the tanker, either during the Farnborough air show or elsewhere?
If you look at the latest GAO report, it is actually very positive in terms of performance on the tanker program, and positive in terms of the international market. So from an international market perspective, we are beginning to focus on that. It is important and clear to us, as with any program, that you want to ensure that the development is going smoothly with your main customer, so that has been our focus. You have seen, I think, the advantage of One Boeing on tanker, just like P-8, which has allowed us to move forward briskly. I would not go so far as to say it will be a big splash at Farnborough, but we are definitely focused on the international arena, because that is a big market for us.
On the Air Force’s T-X trainer program, could you provide more detail about what Boeing brings to the table that is different from competitors’ off-the-shelf view, rather than a clean-sheet design?
We absolutely believe we have a competitive differentiator on the T-X next-generation Air Force trainer, from a couple of different perspectives. Our partner,, brings a different design-develop mind-set. It is that collision of ideas that is helping us see better ways of designing in a more-for-less world.
Our design is completely tuned to the U.S. Air Force and its requirements and needs, and our competitors’ are not. Their products were designed and developed for someone else’s air force. They are going to have to make modifications, go back through flight test. They will have to add capability, perhaps take capability out, which will have a cost impact. We believe that from a cost perspective, we will have an advantage.
The days when the U.S. had no competitors is coming to an end. Can this nation afford to initiate programs that take 20 years from contract award to fielding?
We in the industry have to find a way to be able to move quickly. How do we find a way that allows more seamless, efficient and less-expensive integration of next-generation technology into our designs—not just today but five years or 10 years from now? You could look at an iPhone or you could look at an Android phone. How do we get to the upgrades in a much quicker fashion. It is easy to say, not always easy to do, but our focus is on our engineers. In the long term, that is what is going to differentiate us.
In your role, you have taken over the entire defense portfolio including missile defense. While Boeing has reduced costs on thesystem (GMD), the demand for performance has increased. Without having taken out a target since 2008—what are you planning to do differently to get the program back on track?
We are very comfortable and have been working closely with our customer on GMD on how to prepare for the upcoming test. In all cases—and there is a limited amount I can say about GMD—you take a step back, look at the system itself and walk through the risks and opportunities for how to ensure success when you have the next flight.
What needs to happen in the next few years to the fighter business to make it worthwhile for Boeing to continue to develop fighter aircraft? What we see at thelevel is that there is not a lot of concern to prevent a monopoly happening in the short term. Do you think that the U.S. government needs to consciously embrace the idea of keeping two fighter teams in order to have that happen?
I have had discussions with very senior Department of Defense officials specifically about the even, level playing field in the international arena forand F-18. They have been in agreement that they will ensure a level playing field. The F-15 is doing extremely well through 2018, and we believe there is still some pent-up demand for the F-15. The F-18 is currently strong through the end of 2016. They are having a debate between the services, the Office of the Secretary of Defense, and Congress about future funding for the F-18. We’re bullish on that.
Beyond that, what excites us is that the same skill-sets in the fighter arena you also use on Uclass, Long Range Strike and to a certain degree on T-X. Those are all coming shortly. Our goal is keep the F-15 and F-18 as strong as we can and position ourselves to be successful on as many of the new next-generation programs as we can. We think those merge together very nicely.
You have talked about the power of innovation. On the flip side, you are facing a continued downward trend in your airframe business. If you fail to win T-X, if the gamble does not pan out, is your future as an airframer for the Pentagon in question? If so, do you then shift your focus to being an integrator?
We could have had this same discussion five years ago. There is no continuing decline in how it is done from a revenue perspective. We’re probably up, let’s just say, a double-digit percentage from where we were three or four years ago. Our focus has got to be on how to position to win contracts for long-range strike and T-X. We are absolutely bullish that we are in a very good position to do this.
Boeing has not posted solid sales in what you call the high end of unmanned aerial vehicles. How does that factor into what you are doing on Uclass moving forward?
I think what you have seen is thatclearly has a strong position. has done well. Boeing has had its moments. The unmanned marketplace has changed drastically over the last few years. Unmanned is still large, but it is not the huge panacea that many people thought a few years ago. You basically see it with programs of record. There are just not that many programs of record. At the same time, as you look forward 20-30-40 years from now, it would be hard not to believe that unmanned is going to be a huge part of the fleets of our service customers both domestically and worldwide. So our focus is to take it one bite at a time.
We have a strong position with Insitu. You develop low- to medium-end capability through prototypes and acquisitions if needed, and there are none on the drawing board. That is an area where there is a lot of market potential. On the higher end, it tends to be driven by customer requirements and needs. And the biggie right now is Uclass. The team that wins Uclass will have an edge over the marketplace because that will become the de facto standard in many ways.