According to Xinhua News Agency on the 31st, a review report released by the Office of the Inspector General of the US Department of Defense this week showed that Boeing (BA, stock price: $154.290; total market value: $112.7 billion) overcharged for accessories when producing C-17 transport planes for the US Air Force. For example, the price of bathroom soap dispensers is about 80 times higher than similar products on the market.
According to a report by Business Insider on the 29th, the Office of the Inspector General of the US Department of Defense has initiated this review based on reports received through the Department of Defense hotline to investigate whether the Air Force purchased C-17 transport aircraft parts at a fair and reasonable price. According to the report released by the Inspector General's Office on the 28th of this month, the actual value of the inspected accessories was 4.3 million US dollars, of which about 26% of the payment prices were unreasonable. The Air Force paid nearly $1 million more for 12 different types of accessories in the contract, with bathroom soap dispensers priced 7943% higher than similar products on the market, totaling nearly $150000. The report did not disclose the number of soap dispensers.
The Inspector General's Office stated that it had intended to review all parts of the transport aircraft worth over $22 million. However, due to the Air Force's failure to maintain past cost data and the inability of the Defense Contract Management Agency project team to obtain supplier quotes or find similar commercial parts on the market, more than half of the parts could not be effectively reviewed.
Defense Department Inspector General Robert Stoch said, "The Air Force needs to establish and implement more effective internal controls to prevent excessive payments for accessories before the contract expires in 2031. This situation... may affect the readiness of C-17s worldwide
Boeing responded on the 29th that it is currently studying the aforementioned review report and plans to provide a detailed written response in the coming days. According to its statement, the report "seems to have made inappropriate comparisons" because the specifications and design of military accessories are different from commercial products, and the company has made many changes to the accessories to meet military specifications.
Since the beginning of this year, Boeing has been constantly receiving negative news, with multiple models of aircraft experiencing safety accidents, strikes and layoffs following one after another, production and operation losses intensifying, new aircraft models being delayed in delivery, and market ratings almost falling to "garbage level".
Boeing announced on October 29th local time that the company expects to raise at least $21 billion through issuing additional shares. Boeing's financial report released earlier this month showed that due to factors such as strikes, the company lost nearly $6.2 billion in the third quarter of this year and has lost nearly $8 billion so far this year. According to Bloomberg, Boeing urgently needs capital injection to maintain its investment credit rating. According to the Wall Street Journal, in addition to raising funds through issuing stocks and bonds, Boeing is also considering selling some of its aerospace business.
According to Xinhua Finance on October 30th, the Republican governors of Utah, Missouri, and Montana in the United States jointly sent a letter to Boeing and the labor union that organized the strike, stating that the nearly 7-week strike of 33000 Boeing mechanics has impacted multiple suppliers and affected the economy and employment of the three states. They called on both sides to reach an agreement as soon as possible to end the strike.
This letter is addressed to Boeing and the International Federation of Mechanical and Aerospace Workers, and is jointly signed by Utah Governor Spencer Cox, Missouri Governor Mike Parsons, and Montana Governor Greg Janfurt. The strike has had a profound impact in our state... Boeing has stopped purchasing from most suppliers, and most of them will make difficult decisions to take unpaid leave or lay off employees
Ihsana Munir, Senior Vice President in charge of global supply chain affairs at Boeing's commercial aircraft division, stated in an email to suppliers on the 29th that the shipment of parts for Boeing 737, 767, and 777 aircraft needs to continue to be suspended. Boeing understands that this may result in suppliers having to adjust production and personnel arrangements, and promises to continue working with suppliers and maintaining communication to "maintain the stability of our shared production system as much as possible.
According to Reuters, Boeing and the union declined to comment on the joint letter from the governors of the three states. On the early morning of the 30th, the International Federation of Mechanical and Aerospace Workers announced that it had held a "fruitful" face-to-face dialogue with Boeing on how to resolve key differences, and the two sides will continue to interact.
Boeing's predicament has benefited its main competitor, Airbus in Europe. Insiders revealed on the 29th that Airbus is ready to deliver its first A321 XLR new single aisle aircraft. According to Reuters, the Airbus A321 XLR aircraft project was launched in 2019, aiming to occupy the market space left by Boeing's discontinuation of the 757 aircraft, and was originally scheduled for delivery in 2023. Airbus announced that over 500 A321 XLR aircraft have been ordered so far.