EXCLUSIVE: Boeing shakes up defense business again; Strianese to leave L3 board; Update from the U.K.; and more.

More organizational changes are coming to Boeing’s defense and space business: CEO Leanne Caret will stand up two new divisions and change the way the company manages the development of new weapons.

The changes — announced by Caret in an email to employees Thursday morning — come as the company works to right its troubled efforts to build the Air Force’s new KC-46 aerial refueling tanker.

Next week, the firm will stand up two new divisions within its defense business: Commercial Derivative Aircraft, and Missile and Weapon Systems. It will also eliminate a “Development” business unit created in 2015 to improve “affordability and schedule performance” of new projects.

The changes should “refine our structure around our core markets, common missions and priorities, and position us to deliver,” Caret wrote in the email.  

To be based in Seattle, the Commercial Derivatives unit will handle the KC-46 tanker, the new Air Force One and the P-8 submarine hunter. All three are based on commercial jetliners. The unit will be led by Tim Peters, a former Boeing KC-46 program manager who now runs the company’s flight test activities. The P-8 was previously included with the company’s fighter jets segment.

The Missile and Weapon Systems unit — to be based in Huntsville, Alabama — will oversee Boeing’s work on new intercontinental ballistic missiles, Ground-based Midcourse Defense missile interceptors, GPS-guided Joint Direct Attack Munitions and other weapons. It will be led by Norm Tew, who led the company’s missile defense program. Missiles are currently part of Boeing Defense’s Space segment.

Pat Goggin, vice president of the development division that is being disbanded, will retire later this year.

Boeing spokesman Todd Blecher said the overhaul has been under consideration for several months and was not prompted by Air Force Secretary Heather Wilson’s recent criticism of the way Boeing is running the KC-46 program.

Boeing was supposed to start delivering the KC-46 last year, but has yet to begin. The company has had to eat about $3 billion in pretax charges because of problems that have cropped up in development.

Caret has made numerous changes since becoming the CEO of Boeing Defense, Space & Security in February 2016. Not even a year on the job, she moved defense business headquarters from St. Louis to Arlington, Virginia, literally across the street from the Pentagon. In June 2017, Caret cut 50 executive positions and created four segments with the defense and space business.

The move “was about being more responsive [and] more agile,” Caret told Defense One last year, noting the defense business had had the same organizational structure since 2002.

The latest round of organizational changes go into place on April 2.

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Strianese to Step Down as L3 Chairman

L3 Technologies CEO Chris Kubasik is poised to become the firm’s chairman following a shareholders meeting in May. Kubasik became CEO in January after L3’s former chief executive Mike Strianese retired. Strianese has remained the firm’s executive chairman these past three months, but is “not standing for re-election,” the company announced in its proxy statement in advance of the annual shareholders meeting.

“Following the Annual Meeting, the Board will recombine the roles of Chairman and Chief Executive Officer and continue its practice of electing a strong lead independent director,” the proxy statement reads. “[T]he Board of Directors believes that combining the roles of Chairman and Chief Executive Officer gives L3 the best chance to continue its strong performance over the long term.”

Some U.K. Budget Priorities

It’s rare to get two top U.K. defense officials in the U.S. at the same time, so kudos to the Defense Writers Group for getting Gen. Gordon Messenger, vice chief of the Defence Staff, and Stephen Lovegrove, permanent secretary of the Ministry of Defence, to chat with reporters at a breakfast this week. (Messenger is the U.K. equivalent of the U.S. vice chairman of the Joint Chiefs of Staff and Lovegrove is essentially the deputy defense secretary and comptroller in one.)

What’s on their minds: Russia’s suspected poisoning of British spy Sergei Skripal and his daughter Yulia in Salisbury, England. “It’s not spy-on-spy. This is an egregious breach of international law in the chemical weapons convention,” Lovegrove said. Messenger called for the development of “techniques and processes that deter and counter this type of activity on a steady-state basis.” Asked how you could deter such a small, targeted attack, the general said: “We need to just think through what we mean by deterrence in the modern age. Deterrence as a principle hasn’t changed since the Cold War. It is about ensuring that the risks of any action by a potential adversary outweigh the potential benefits. That is what deterrence is about. In an era of steady state, gray zone, what we have to be able to do is to be ready to respond and be ready to act. That doesn’t necessarily mean that you need to respond and act in the same vector that you were attacked on. To be able to both escalate and de-escalate.”

The U.K. is also spending a lot on nukes. About £44 billion of £178 billion the U.K. plans to spend on new weapons (between 2015 and 2025) will be for nuclear-related work, Lovegrove said. The bulk of that nuclear money is to replace the Royal Navy’s Vanguard class of ballistic missile submarines. The second-highest area of spending: £23 billion in “information and network,” Lovegrove said. “That, I think, gives an indication of where we think that a lot of the focus for the coming years is going to be,” he said. “It’s going to be domination of the information space and making sure that we can operate and integrate and deny where we need to.” Unlike the U.S., which recently announced plans to develop a low-yield submarine-launched nuclear missile, the U.K. is not interested in this type of weapon. “It’s not something we’re considering,” Lovegrove said.

But they did tout their conventional missiles. “There’s a very vibrant missile industry in the U.K., which is absolutely world-leading in terms of the technology that it delivers,” Messenger said. It’s no secret that European missile maker MBDA has been wanting the U.S. military to buy its Brimstone missile. The general, naturally, touted the weapon, which is being used by U.K. forces fighting in the Middle East, but also mentioned a desire to acquire a “common family of missile systems” across its military services. “Recognizing that the maintenance of missile stockpiles is a challenging and expensive thing to do into the future, the more commonality that you can build between you maritime, air, ground missile suite, the more modularity that you’re able to get from your future missiles, the better,” he said.

And of course there’s the F-35. The U.K. has so far ordered 48 of the jet’s U.S. Marine Corps B variant and plans to buy a total of 138. “We’re very pleased with the development of the aircraft, Lovegrove said. It “is doing everything that we hoped it would do and we are pleased to see the costs of acquisition coming down in line with the way that we assumed it would.” Like the U.S. military, the U.K.’s next area of “intent interest” is the “sustainment and operational cost of the aircraft.” (Bonus: Read the Bloomberg scoop from this week about the U.S. Air Force possibly having to cut its F-35 buy if sustainment costs don’t drop.) Lovegrove was scheduled to meet with F-35 officials and Deputy Defense Secretary Patrick Shanahan while in Washington. “We’ve got headroom in the program, but there is a degree of uncertainty here … and we must maintain absolute focus on it,” he said.

Making Moves

President Trump will nominate James Anderson to be an assistant secretary of defense for strategy, plans, and capabilities — the policy position at the Pentagon that oversees nuclear weapons and missile defense — the White House announced on Tuesday. Anderson, a former Marine Corps intelligence officer, is vice president of academic affairs at Marine Corps University. He’s a former director of Middle East policy in the Office of the Secretary of Defense.

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