MIA in 2019: Boeing’s tanker, the missile defense review — and a confirmed SecDef

You call that a vacation? Welcome to 2019, where it’s shaping up to be an eventful January.

I wrote you last on Dec. 20, which turned out to be quite the day. That evening, Defense Secretary Jim Mattis submitted his resignation to President Trump, saying the president would be better served by a secretary whose views better aligned with his. That was right after Trump surprised the Pentagon, and its Syrian partners, by announcing an immediate withdrawal of American forces. Mattis, in his two-page resignation letter, praised American alliances around the world. (U.S. Special Envoy to Counter ISIS Brett McGurk also resigned.) Trump soon tweeted his acceptance of Mattis’ resignation, calling it a retirement and adding some warm words. Mattis planned to stay until late February, giving ample time for the confirmation of a new SecDef.

Didn’t happen. Three days later, Trump ordered Mattis out by Jan. 1, and elevated Deputy Defense Secretary Patrick Shanahan, a career Boeing executive with just 18 months of government experience, to acting SecDef. Some sources see the coming months as a trial period for Shanahan after which the White House could nominate him for the job, full time.

Trump’s abrupt Pentagon shake-up has set off a round of musical chairs inside the Defense Department. Pentagon Comptroller David Norquist has been tapped to “perform the duties” of the deputy defense secretary. For what it’s worth, Shanahan and Norquist looked pretty chummy at an October press briefing, perhaps a sign of a good working relationship.

The leadership changes come as the Pentagon finalizes its 2020 budget proposal, the one that’s expected to be somewhere between $700 billion and $750 billion.

Shanahan, who arrived as deputy defense secretary fresh off a three-decade career with Boeing, quickly recused himself from matters involving the company for two years, as required by federal ethics regulations. On Jan. 2, Shanahan spokesman Lt. Col. Joe Buccino said the acting SecDef “has recused himself for the duration of his service in the Department of Defense from participating in matters in which the Boeing Company is a party.”

Trump, who in October called for a 5 percent cut to the defense budget, has since recanted — and then some. During an unannounced visit to Al Asad Air Base in Iraq on Christmas, he said defense spending would actually go up. “I mean, I want to see costs come down, too. But not when it comes to our military,” he said. “You have to have the finest equipment anywhere in the world, and you have that — $716 billion. And this year, again, we’re going to be — don’t tell anybody because nobody else knows — even a little bit higher.”

So how is the investment community reacting to the Syria troop withdrawal and Mattis’ exit? Some are expecting a decline in the overseas contingency operations budget, the war funding once called the “emergency supplemental.”

“President Trump's decision to withdraw troops from Syria and possibly Afghanistan could mean significant decline in OCO spending,” Cowen analysts Roman Schweizer and Cai von Rumohr write in a Jan. 2 note to investors. “Timing on those moves now may be sliding but the decision-making cycle appears to be opaque. Direct near-term impact on contractors (ex-LOGCAP providers) looks modest; longer-term effect keyed to possible spending mix shift.”

Capital Alpha’s Byron Callan writes that purchases of bombs and missiles, which have surged since the U.S. began leading coalition airstrikes on ISIS in 2014, could decline in the coming years.

Citi’s Jon Raviv writes that it’s too early to foretell the impact of Mattis’ departure, but “it could be minimal as perceived threats and GOP legislators ensure continually robust spending.”

At least the Pentagon’s 2019 is in place, three months into the fiscal year..

“The customers are spending money,” Raviv writes. “We have multi-year growth. But, big changes in ‎leadership ranks could create discontinuities which tend to slow down decisions.”

Shanahan “provides some continuity,” particularly since he has been deeply involved in the fiscal 2020 budget build.

“The risk of course is that Shanahan is less willing to push back on bad ideas (that seems to be the path to job security),” Raviv writes. “That could mean more uncertainty and whipsawing headlines.”

Bonus: Oh, part of the federal government is shut down with Trump and Congress at odds over funding the president’s much-desired wall along the Mexican border. Hundreds of thousands of government employees in the Department of Homeland Security and other departments are working without pay or being furloughed. Get the latest on the stalemate, here.

Welcome

You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. Happy New Year! Send your tips, feedback, and New Year's resolutions to mweisgerber@defenseone.com or @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!


From Defense One

Trump Kicks Mattis Out Early, Names Shanahan Acting Defense Secretary // Katie Bo Williams and Marcus Weisgerber

The abrupt decision comes amid a growing crescendo of criticism of the president's snap decision to withdraw U.S. troops from Syria.

Goodbye, Mattis. Goodbye, Syria. Hello, 2019 // Defense One Staff

Dramatic shifts abound as Trump puts US military's war plans in doubt, Democrats resurge in Congress, and the Pentagon gets a new boss.

The Pentagon Doesn't Know All the Software on Its Networks—And That's a Problem // Heather Kuldell

The Defense Department faces "unnecessary" risk without a complete software inventory, according to the agency's inspector general.


Air Force Buy of New F-15s Looks Likely

The $1.2 billion request for 12 of the new fighter jets will be part of the Pentagon’s fiscal 2020 budget request, set to go to Congress next month, according to Bloomberg. We first told you last July about the F-15X being pushed by Boeing. We now hear the plane is being called the F-15EX. It’s essentially a single-seat, upgraded version of the F-15E Strike Eagle, already flown by the Air Force and foreign versions being made for Saudi Arabia and Qatar. Why this matters: Air Force Secretary Heather Wilson, in September, said, at the time, that buying the F-15X (of a F-22/F-35 hybrid being pitched by Lockheed Martin) was not on the table.

New Year, Still No Tanker

Despite a pre-Christmas report that Boeing would deliver the very first KC-46 tanker by year’s end, it still hasn’t happened. As Reuters reported (and we have also hear from sources), paperwork was being prepped for Defense Secretary Jim Mattis’ signature. But, well, you know what happened there. On Wednesday, Investor’s Business Daily reported that glitches with the aircraft were to blame for the delay, citing “a senior defense official.” Further complicating things is Shanahan’s extended recusal from dealing with all matters related to the company. It’s unclear whether acting deputy Norquist or Ellen Lord, undersecretary for acquisition and sustainment, would handle the acceptance of the new tankers. All it means is that built-but-undelivered tankers will continue to sit along the flightlines at Boeing factories in Washington State and Texas.

New Year, Still No Missile Defense Review

And still no word when or if it’ll be publicly released.

Boeing Logos Continue Popping Up at NHL Rinks

And they’re showing up at areas in cities (Dallas and Ottawa) you wouldn’t necessarily associate with Boeing. Two years ago we told you how Boeing had placed its logos on the boards and sponsored game highlights on the arena scoreboard at Washington Capitals games. A perennial frontrunner and now defending Stanley Cup champ, the Caps are the hot sports ticket in DC these days, meaning lots of power players (see what I did there) like lawmakers, lobbyists and bureaucrats are in the seats seeing those logos and videos. Now Boeing logos are on the boards at the American Airlines Center (home of the Dallas Stars) and Canadian Tire Centre (home of the Ottawa Senators). Seems random, right? Not exactly. Plano, Texas, (20-minutes north of the Stars arena) is now home to Boeing Global Services, the company’s new aircraft repair and maintenance division. The advertisements in Canada’s capital are much more strategic: Boeing, despite recent dust-ups with the Canadian government, is still very much trying to sell F/A-18 Super Hornets there. Also, Boeing Canada is celebrating its 100th anniversary this year.

SpaceX Launches New GPS Satellite

The Dec. 23 launch marked two firsts: it’s the first time Elon Musk’s startup has launched a National Security Space mission and it’s the first launch of a GPS III satellite.

Making Moves

  • As Mattis went, so did his spokeswoman Dana White —formally, the assistant to the secretary defense for public affairs. Charles Summers, her deputy, is now serving as acting assistant to the secretary of defense for public affairs.
  • Kathy Warden has taken over as CEO and president of Northrop Grumman, replacing Wes Bush, who remains the firm’s chairman.
  • Lucy Ryan is now corporate vice president of communications for Northrop Grumman Corporation. Before joining Northrop last year, Ryan was head of communications for General Dynamics.
  • Wilson Wang has been appointed as vice president and chief financial officer of MITRE Corp. “Wang will also lead MITRE’s business transformation efforts encompassing a multi-year effort to transform and modernize business systems into an integrated operating platform at the company,” the company said in a Jan. 2 statement.
X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.