Boeing’s stock dropped as it recently pushed out by Air Force’s intercontinental ballistic missile replacement contest despite CEO Dennis Muilenburg praising the aerospace behemoth’s overwhelming effort on the project during the second-quarter conference call on Wednesday.
Boeing was competing against Northrop Grumman Corporation (NOC), an American global aerospace and defense tech company including one of the world’s leading weapons manufacturers and military technology providers, for the GBSD program to replace Boeing’s aging land-based Minuteman III intercontinental ballistic missile system. The initial contract costs around at $11 billion but the whole program was valued around $85 billion-$100 billion.
GBSD, Ground-Based Strategic Deterrent is a United States’ ground-based intercontinental ballistic missile (ICBM) system, to enrich its ground-based nuclear ICBM in 2020. In 2027, the GBSD program is expected to deploy and remain in service until 2075.
Boeing said in two letters to the Air Force in early July that Northrop has “an unfair advantage” over Boeing because of “its control of solid-rocket motors” and that the Air Force didn’t help enough to resolve the issue.
Boeing’s shares dropped 3.69% to 348.09 USD in the stock market today, collapsing drastically below its 50-day dynamic average. Boeing stock fell 3.1% on Wednesday on its second quarter’s earnings report. The relative strength line of Boeing’s stock is now at its lowest level since January 2018.
Northrop stock was raised up to 3.5% on Thursday, after bursting nearly 6% on strong revenues.
In addition to pushing out Boeing from the GBSD contest, the Pentagon is reportedly going to pay Boeing less money for the KC-46 aerial refueling tanker, than promised.
So far, Boeing has delivered 13 tankers. The Air Force has abandoned $360 million from the company due to issues with the plane, including technical faults on the video system used for the refueling boom.
Air Force has also claimed that Boeing has used trash tools in manufacturing KC-46 planes, which results in temporary delivery withholds.
“The Air Force is withholding payments to protect our interests and incentivize Boeing to deliver KC-46s that meet all specification requirements in the contract,” the Air Force said in a statement provided to Defense One news agency on Wednesday. “To date, the Air Force has withheld approximately $360 (million) from Boeing for KC-46s delivered so far,” it added.
Boeing has faced more than $3 billion in levy related to repeated delays in schedule and budget overruns on the KC-46 program.
Grounding of Boeing’s best selling 737 Max, delay in debut flight of 777X, payment cuts in KC-46 program and dropping out from GBSD contest with immense loss in the stock market. It seems like 2019 is not fair with the aero tech giant so far and more than that it’s not fair enough with itself, too.
