is restructuring its business units once again, undoing some of the changes it enacted only two years ago in an effort to reap savings that it can pass on to more frugal defense customers worldwide.
The most significant change is coming in itsMilitary Aircraft unit, where arguably the largest new division, Mobility, Surveillance and Engagement, will be established and headquartered in the Puget Sound, Wash., area.
“We are at one of the most challenging yet opportunity-rich times in our history,” says Dennis Muilenburg, president of Boeing Defense, Space and Security. “While funding for the U.S.is under extreme pressure, we’re innovating and expanding our core, in the U.S. and around the globe, to sustain and grow our business.”
This new unit will encompass several of Boeing’s major defense programs, including the Air Forcetanker replacement and Navy P-8 maritime patrol aircraft. Tim Peters, who is currently a vice president at the legacy Surveillance and Engagement division, will lead the new organization.
This group will have the unique task of tapping into Boeing’s defense and commercial experience for future programs that could — like the KC-46 and P-8 – marry an existing Boeing commercial platform with military technology. “That is going to be really powerful going forward,” says Todd Blecher, a Boeing spokesman.
A dysfunctional relationship between Boeing’s commercial and military units on the company’s first KC-135 replacement proposal was blamed, in part, for its loss. But two years ago, Boeing managed to turn the problem around and capture that business after the Air Force was directed to recompete it. Cooperative practices used between the two units are a unique advantage for Boeing across the contracting landscape and an edge this new unit is postured to exploit, Blecher says.
There is a potential market for derivatives of the P-8 for ground surveillance or, possibly, international sale. Foreign sales are also possible for the KC-46. Beyond that, the Air Force will also have to consider how to modernize its intelligence aircraft fleet, some of which are based on aging 707 airframes. Boeing also unveiled a concept at this year’s Farnborough air show to scale the technology of the P-8 onto other, smaller platforms in order to chase business in countries that cannot afford to buy or operate a large aircraft such as the 737.
The mobility systems division, which includes the KC-46 as well as, the and Chinook helicopter, will cease to exist. The latter two programs will be shifted into a Vertical Lift division, which will also include the Apache and AH-6 helicopters managed at the company’s Mesa, Ariz., facility. This structure harkens back to Boeing’s earlier framework, which had all rotorcraft programs under one managerial roof until the 2010 restructuring siphoned the attack helos into the Global Strike division and cargo helicopters into the mobility systems division.
Another structure devised in 2010 that is being unraveled is a unit combining unmanned systems — the, Unmanned Little Bird and A160 Hummingbird — with Boeing’s weapons work. Weapons will now be placed in the Global Strike unit with unmanned aircraft programs retained as a separate, stand-alone unit reporting directly to Boeing Military Aircraft President Chris Chadwick.
Debbie Rub, who now heads the combined weapons and unmanned systems group, will take over the Global Strike division that will oversee the fixed-wing fighter aircraft programs and weapons projects.
Finally, the Electronic and Mission Systems division will merge with the Information Solutions division under the Network and Space Systems Division, which is headed by Roger Krone. He will retain his position, but Ralph Meoni, who now heads the legacy electronic systems group, will take the top position at the consolidated unit under Krone.
The restructuring takes effect Jan. 1, according to Blecher.
Company officials hope the changes bring about further operating efficiencies, producing savings that can be passed along to customers struggling in a tight economy. Since 2010, Boeing’s defense systems unit has identified $2.2 billion in savings and 30% of its executives will be let go by year’s end. “It is going to be difficult, but we are hoping that savings we identify across [2013-2015] will be on the same order of magnitude as we have accumulated to date,” Blecher says.