Podcast: Boeing Defense CEO Ted Colbert On His Rebuilding Plan

Ted Colbert, the president and CEO of Boeing Defense, Space and Security, vows to bid differently for future programs in a conversation with Aviation Week editors.

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Rush Transcript

Jen DiMascio:

Hi, and welcome to the Check 6 podcast. I'm Jen DiMascio, the Executive Editor for Defense and Space. I'm here with Pentagon Editor, Brian Everstine, and together we're here at Boeing headquarters overlooking the Pentagon with Ted Colbert, the President and CEO of Boeing Defense, Space and Security.

He's been in this job a little bit over one year, which if this were a sports team, we might call it a rebuilding year. The company has absorbed multiple charges on its advanced development programs, and we'd really like to talk with Mr. Colbert about his vision for changing course in the future. Mr. Colbert, thank you for joining us today.

Ted Colbert:

Well, thank you, Jen, and good to be with you as well, Brian, once again, and thank you for the opportunity to be able to share what's going on in Boeing Defense, Space and Security. Obviously, as you described, it's been challenging several years for many reasons, which drives me to my priorities. First, we've got to drive stability and predictability in everything that we do. The most important things that we've been working on with regard to stability are workforce. We've got to have a settled, well-trained, proficient workforce working on every program in the company.

Second, we've been focused on our supply chain. It's important, obviously, given the type of work that we do, to have a supply chain that is first time quality, that is minimal rework, that we are connected to in a way to deliver our capabilities to our customers, to serve their missions. So, stability and predictability are first priorities. We have some very large proprietary campaign work going on that's important to us for the future of our business that we're working on, all of that wrapped around a team that is very mission-focused with the Department of Defense here in the US and our allied customers around the world. So, first order is predictability and stability, and that's where we stay.

Jen DiMascio:

We had a bit of a longer discussion before this, and you mentioned that some of those workforce and supply chain challenges are going to take you a little longer to get past.

Ted Colbert:

Yes.

Jen DiMascio:

How long do you think it is before you're going to be where Boeing wants to be?

Ted Colbert:

From a workforce perspective, I think we're making a lot of progress. We hired about 10,000 teammates last year. We're going to hire another about 15,000 this year. As we hire the new employees, we train them and that drives stability in our operations. We're seeing improvements in lost workdays, we're seeing improvements in attendance. Morale, we're seeing improvements there. I just did an all team webcast yesterday and I asked a question to them about where they see themselves in our strategy and the number just keeps getting better and better and better. So, I think that piece of it is making steady progress.

The supply chain I think is going to be bumpy for a while. Our suppliers had some of the same issues we had with regard to their sub-tier suppliers and their own workforce. So, as they stabilize, we will as well. The way that we are working with them is really important. We are staying very close to them at all levels in the company, from my seat down to our program leaders into the factories. We've deployed talent into the supply chain to help with requirements consumptions, to help with equality, standard implementation. All those efforts are yielding benefits to us on a day-to-day basis.

So, I believe that we've got the right tactics in place and we're seeing improvement and at the same time, we have one-time challenges with the quality that you've seen with some of our big platforms that we've got to work through. That's where we are and I think we're making steady progress. It's going to take a couple of years to get it really back to where we want to get to. As you probably saw in our investor conference, we're working on this path to get back to low double-digit margins over the next several years. The profile for the stability with our workforce and supply chain fits that. The other part of it I'll talk about is how we contract for the next big programs. That is another really important enabler to get us to a real healthy business model.

Brian Everstine:

On the stability on some of your key development programs, we've seen a series of delays lately with T-7, the ejection seat issue. The VC-25B [presidential aircraft], you have some workforce issues, KC-46 [aerial refueling tanker]. How are you getting past these? Can you talk about the way ahead on some of your key development programs?

Ted Colbert:

Oh, indeed. T-7 [advanced trainer], as you described, we worked very closely with the customer on the escape system. We've got a path forward there. We've done tests recently that are very positive and we're working through the future schedule. We'll be flying the T-7, EMD flights will be happening in the summer. That's the plan right now, and we're very bullish on that. So, we're making very good progress. MQ-25 [unmanned, carrier-based UAS], we've worked through. It's a development program. It's an autonomous refueling tanker. We've had learnings over the last several years. We're settling down the schedule there with the customer, and you would've seen some of that in the press as well.

It really is about, to your point, doing some re-baselining of some of these programs based on the learnings that we've had and the realism that's come from those learnings, and in a way that is much more stable going forward. Our customers have been very close and partnered with us on all the programs and encouraged by VC-25B. Obviously, we've got a lot more work to do there. The baseline that we've set there, we're confident about being able to deliver, but again, with all of them, just a reminder, this is development work. So, there will be discovery as we go through the development process into build, into flying and testing, and we've got to be ready for that and make sure that we stay close to the customer and keep our disciplines from a safety and quality perspective.

Brian Everstine:

You had touched on the one-time issue with the KC-46 that you're dealing with now.

Ted Colbert:

Yes.

Brian Everstine:

Can you give a way ahead on when you start to see those deliveries resuming? I was wondering if you could also look more broadly toward the future, as the Air Force looks to accelerate its next-generation tanker, the NGAS. What lessons learned are there from the KC-46 program that you can bring forward to a next new development program?

Ted Colbert:

Oh, indeed. First, we are really close with our supplier on the notice of escapement there. We're confident that we'll get back to deliveries soon. I can't give you the exact date because we're working through that process right now and we're keeping to our commitment this year to the Air Force on the KC-46, until something changes that tells us that we can't deliver the number of planes we've committed to. So, encouraged by that. It's been a great process with our teams on the commercial side of the business and with the supplier.

Look, from a future perspective, there's a ton of lessons learned. You all know about RVS, the remote vision system. You know about all the other mission systems we put into the capability. We're encouraged that we're going to take all those lessons learned and continue to deliver tankers for a really long time for the war fighter, because we've put all the investment into the product. It makes no sense to start over right now on that product. That said, this really gets informed by the architecture of the future mission and if that requires a different type of tanker, we want to be very close to our customer in helping design and ideate around that.

All the lessons learned don't go away that we've had over the years from a supply chain, from a technology, from a build and producibility perspective. Wiring, we learned a lot about wiring from KC-46 at one point that we've carried forward on other programs. So, that's part of our institutional memory that we've got to make sure carries forward and we're confident that we'll do that, whatever the next product looks like.

Jen DiMascio:

What about lessons learned on the contracting side? As you look to a next generation tanker, a next generation air dominance program, do you think Boeing will continue in the vein that it has in the past to bid low for contracts and make up on the backend with a lot of charges?

Ted Colbert:

I believe across all domains and in my discussions, which I'm really encouraged by, the contracting process in the early stages of these programs will be a lot more collaborative and a lot more agile, and that'll allow us all to invest in the places that make sense and to drive change on the platform at a timeline that makes sense and doesn't create this obsolescence issue that causes a bunch of rework once we actually start building an EMD past static article. So, I think that the contractor process is going to evolve. I talked to the acquisition community over in the DOD. Everyone's keen to evolve to a place that is much more stable for all of us, which hopefully won't get us into a place where we have to take the approaches that have been taken in the past.

Our intent is to be clear and understand the mission and the requirements, demonstrate our ability to fill capabilities to support those requirements, be transparent about the cost profile, both ours and the supply chain, and build up these programs in a way that's right for the war fighter and right for the taxpayer. That is where we want to go going forward. Yes, it'll take investment sometimes. That is definitely part of the way this business works because it's competitive, but it will be investment based on clear requirements as much as possible and realism into the maturity of technology and producibility of those next platforms that come to bear.

Brian Everstine:

Jen just highlighted air dominance. So, I was hoping you could talk a little bit about this portfolio. It's going to be a very critical area for Boeing as you look beyond the F-18. You've reorganized Phantom Works, air dominance together. Can you talk about what your goals are for this and what's Boeing doing to get there?

Ted Colbert:

Well, look, I'll tell you the first thing is getting focused on stabilizing what we have today. We are still delivering F-18s. We have an F-18 [service life modification] program. We have F-15 EX. We've been implementing improvements to the F-15 EX program, executing accelerated lean efforts, put a new technology in place. Part of the F-15 EX uses full-size determinant assembly. We're using some of our enduring platforms as both, ways to implement new technologies and learn, and then we're investing going forward.

We've a tremendous amount of investment in St. Louis, in our facilities there, that support our fighter air dominance business. We have invested in an advanced materials capability out in Mesa, Arizona to support proprietary efforts around these platforms as well. This is all about keeping a real talented and strong workforce that can build whatever the next air dominance platforms look like and we've got the technologies ready to do that. So, our investment continues in that space, whether it's people or technology or facilities, and hopefully that tells a story that needs to be told about what's important to us.

Brian Everstine:

A huge priority in this area is going to be collaborative combat aircraft for both the Air Force and the Navy. Boeing obviously has a background with MQ-28, the MQ-25. Can you talk about what you're hoping to accomplish in this area, how you're going to compete for these really large numbers of [Collaborative Combat Aircraft]?

Ted Colbert:

MQ-25, our autonomous re-fueling tanker capability, again, very excited about. We'll leverage autonomy capability. We'll leverage our understanding of the carrier deck and the Navy and our customer there. We've invested in a facility to build those as well out in Illinois near St. Louis. Investment's going in the right direction. We're going through the development process of that right now. So, I see that as a long-term franchise program that will also have the potential to have derivatives based on requirements that come from our customer.

The MQ-28 manned, unmanned teaming capability that we've developed with Boeing Defense Australia has another capability that in the long run will demonstrate the power of autonomy and artificial intelligence. We are staying, again, close to how the requirements play out on manned and unmanned teaming types of capabilities as well. It's called Loyal Wingman, Ghost Bat. We have a whole bunch of different names for the capability that we have in Australia called MQ-28. So, another very important area of focus. That will be exciting for us because it'll be an area where we'll develop something in Australia. We work with the US government to have bidirectional understanding around all the export challenges and be able to compete where it fits around the world hopefully in the long run.

Brian Everstine:

I guess, speaking of Australia, one big emerging program is the E-7 Wedgetail, obviously originally Australian, but the US Air Force is putting very critical importance on this, looking to accelerate in any way possible. There was $200 million added in the appropriations bill last year to try to speed it up.

Ted Colbert:

Yes.

Brian Everstine:

But it seems like we're moving pretty much as fast as you can. Is there any way to bring on the prototypes faster or bring the follow on fleet faster?

Ted Colbert:

We are working hard every day to do exactly that. E-7 is a top priority for us, obviously with learnings in Australia and the UK, our accelerated focus on it here in the US. Our commercial derivative team is again taking lessons learned from all of our other programs to help us accelerate, whether it's VC-25B or KC-46, or other programs in our portfolio. So, a lot of lessons learned being carried forward.

Again, the collaborative effort with our customer makes all the difference in the world. I've been in this job for a little over a year, as you said, Jen, and that changes everything. When we collaborate in the right way to remove constraints both on our side, on their side, and in the supply chain, we can move much faster and that's exactly what we're doing.

Jen DiMascio:

Well, you've been so generous with your time. I just wanted to thank you for joining us today. That's all that we have time for. So, thanks again. We look forward to seeing you at the Paris Air Show.

Ted Colbert:

Yes, indeed.

Jen DiMascio:

That's a wrap for today's Check 6 podcast. Special thank you to our producer in London, Guy Ferneyhough, and join us again next week for another episode.