Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. It's been a tough
stretch for Boeing, and this week's earnings made that clear.
Speaker 2 (00:12):
The last year especially, has been like something out of
the book of job. From a corporate perspective, just really
felt like everything that could go wrong did go wrong.
Speaker 1 (00:24):
Julie Johnson is a senior aerospace reporter for Bloomberg.
Speaker 2 (00:27):
It started with a panel blowing out of an Alaska
Airline seven thirty seven, just moments after it had taken off.
Photo show a gaping hole where an emergency door could be.
But I think it really highlighted the quality breakdowns at
Boeing because the plane had just come out of Boeing's
factory like two months earlier, so it's brand new.
Speaker 1 (00:50):
Federal air safety officials say bolts on a Boying jetliner
were missing.
Speaker 2 (00:55):
It sort of precipitated a series of investigations. Boeing's managed
had a big shake up.
Speaker 1 (01:01):
Boeing said it would reduce its workforce by ten percent
as it tries to recover from financial and regulatory troubles,
and Boeing brought in a new CEO, Kelly Ortberg, with
a mandate to turn things around. Ortberg now finds himself
at the helm of a storied American manufacturer, entering twenty
twenty five with a chessboard of challenges, a new earnings
(01:23):
report on Tuesday that paints a grim picture of its finances,
an uphill battle to regain public trust, and a tightrope
act in Washington that will force it to work with
one of its biggest rivals, Elon Musk, and President Trump himself.
I'm David Gera, and this is the big take from
Bloomberg News today. On the show Boeing needs to turn
(01:46):
things around? Can it pull it off? And how might
President Trump's return make things even more complicated.
Speaker 2 (01:56):
Something I think people don't appreciate about Trump is that
he's a plane guy.
Speaker 1 (02:01):
Bloomberg's Julie Johnson says President Trump may like aviation, but
he especially likes Boeing. He's mostly used Boeing planes in
his private fleet for years, but when Trump became president
in twenty seventeen, he found himself in the middle of
the US government's relationship with the plane maker. For Boeing,
the US government is not just a regulator, it's also
(02:23):
one of the company's marquee customers. Boeing supplies its aircraft
to the Postal Service, to NASA, and the military. It
also manufactures the planes that presidents use to travel all
over the world. Every president since FDR has flown on
a Boeing plane, but the current models are a little outdated.
Speaker 2 (02:41):
The Air Force one planes have been flying around, I
think since the George Bush administration, so they're due for replacement.
Speaker 1 (02:50):
During his first term, President Trump helped negotiate a contract
with Boeing to upgrade the Air Force one fleet with
revamped seven forty seven jets. He's proud of the deal
and even brought it up in an interview with Bloomberg's
editor in chief John Micklethway last October.
Speaker 3 (03:05):
So I'm getting think of this the exact same plane
for one point seven billion, less exact except to have
a better pay job. Okay, much better pay job.
Speaker 2 (03:16):
Trump cares about these Air Force aircraft honestly, like nobody
else on the planet. He's highly invested in these planes.
He kept models on his desk at mar Lago when
he was out of office.
Speaker 1 (03:29):
Boeen was supposed to get these upgraded Air Force one
jets into the sky by twenty twenty four, but the
project is years behind schedule and two point seven billion
dollars over budget. It's a reflection of the many problems
the company has faced in recent years. But Boeing's new CEO,
Kelly Ortberg, knows that getting these planes in shape is
(03:50):
a top priority because they matter to Trump.
Speaker 2 (03:54):
One of the first things that Ortberg did after Trump
was elected was set up some phone conversations with the president,
you know, where they talked through a variety of things,
but he sort of delivered the bad news to the
President about some of the problems Boeing had had, and
the transition team response at the time was along the
(04:17):
lines of what can we do to help with these delays.
Speaker 1 (04:22):
To help keep the Air Force one project under four
billion dollars, the Trump administration agreed to drop some special
features like the ability to refuel mid air. Trump also
roped in his new Department of Government Efficiency, which is
tasked with reducing government spending and maximizing productivity, and the
man in charge of that department is Elon Musk, whose
(04:43):
company SpaceX is one of Boeing's main competitors when it
comes to securing NASA contracts. Now, Musk's scrutiny of Boeing
and its work with the US government could test the
company's path to recovery. One afternoon in December, Musk's own
jet landed at a Boeing facility in San Antonio, Texas.
Speaker 2 (05:03):
It's where Boeing is working on the new Air Force
one aircraft.
Speaker 1 (05:08):
According to air traffic that Julie and her team monitored,
Musk's jet landed just a few hours after another plane
which was carrying Boeing CEO Kelly Ordberg.
Speaker 2 (05:18):
And the two aircraft were parked right next to each other,
and that's how we confirmed that there had been this
highly unusual meeting between one of Boeing's main rivals and
a huge critic of the company and its new leadership.
Speaker 1 (05:36):
I just wonder sort of what you know of the
substance of the conversation that took place that day, or
I guess, more broadly, sort of what Elon Musk was
doing there at that airfield in Texas.
Speaker 2 (05:45):
We know he was there on behalf of the president.
We don't know what was discussed. The meeting we think
took about two hours, again just based on the jet
traffic in and out of the airport. But interestingly, a
week later, when Musk was asked on Twitter about Boeing.
He spoke very highly of the new CEO Ortberg, so
(06:08):
it feels like he met the moment, But really we
won't know that for a while.
Speaker 1 (06:14):
From there, both jets flew to Florida, specifically to Palm Beach.
Ortberg has a house there, and Musk has spent a
lot of time at the President's resort.
Speaker 2 (06:24):
It's just fascinating to me that they both wound up
in the vicinity of mar A Lago and Trump. And
doesn't that sort of encapsulate this moment in time? Ortberg
as the chief of the largest US exporter on the
global stage, with a very volatile, unpredictable president and a
(06:48):
new set of characters around Trump.
Speaker 1 (06:52):
So how is Ortburg managing that unusual position and the
hurdles Trump presidency could throw in his way? Boeing succeeding
at pulling things together? That's coming up. President Trump's relationship
(07:13):
with Boeing goes way back almost thirty years. Before he
was negotiating deals with the Airliner on behalf of the
US government, he was buying a fleet of Boeing jets himself.
Donald Trump bought the Eastern Shuttle for a price tag
of three hundred and sixty five million dollars.
Speaker 3 (07:29):
You had other people wanting this very much, as we
all know, and it was just really a nice victory.
Speaker 1 (07:33):
Within three years, he'd sold the Trump Shuttle airline, but
he never stopped caring about planes, and his tone on
Boeing has fluctuated over the years.
Speaker 2 (07:42):
One of the first things he did when he was
elected in twenty sixteen was this kind of fiery tweet
about Air Force One being over budget. Boeing is building
a brand new seven forty seven air Force One. He wrote,
costs are out of control, more than more brilliant cancel order.
Speaker 1 (08:02):
Soon after the tweet, he told reporters he might cancel
Boeing's Air Force one contract.
Speaker 2 (08:07):
I think it's ridiculous. I think Boeing is doing a
little bit.
Speaker 3 (08:10):
Of a number.
Speaker 2 (08:11):
And Boeing used that to actually set up a series
of meetings with the President and to establish this tight
relationship with him, and he became something of a cheerleader
for Boeing, though he also didn't hesitate to sling a
few darts at the company as well, because that's Trump
being Trump. But early on he visited Boeing's plan in
(08:33):
South Carolina.
Speaker 3 (08:34):
I want to thank the great people of South Carolina got.
Speaker 2 (08:37):
Boeing's aircraft were the backdrop to the speech that he gave,
and he ended it.
Speaker 3 (08:43):
May God bless the United States of America, and God
bless Boeing.
Speaker 2 (08:50):
With God Bless Boeing, which again I mean just really
unconventional and sort of a break with the usual presidential decorum.
But I think it just reinflorced that Trump was invested
in this company. They generate a big trade surplus for
the US in aerospace. It's one of the industries where
(09:12):
the US definitely exports more than it imports.
Speaker 1 (09:16):
For all of Trump's criticism and praise of Boeing, there's
a truth that, at least for now, he can't avoid.
Boeing is the biggest US exporter, and in many ways
it represents the kind of American manufacturing Trump pushes in
speeches and proposed policies.
Speaker 3 (09:32):
We want products made by our workers in our factories,
stamped with those four magnificent words made in the USA.
Speaker 2 (09:43):
Boeing planes are built in the US, though some of
the engineering is done overseas, and they have a global
supply chain. But it's an American made product.
Speaker 1 (09:53):
But that also makes the company vulnerable to Trump's protectionism.
Speaker 2 (09:57):
Anytime you talk about roiling global trade, definitely, I think
heartspeat a little faster at Boeing.
Speaker 1 (10:04):
The trade war during Trump's first term cost the company
its market lead in China, which hasn't placed a large
aircraft order with Boeing since twenty seventeen, and the tariff's
Trump is threatening this time around could take an even
bigger toll on a company whose finances are already suffering.
Speaker 2 (10:22):
I think they are girding definitely for some more turbulence,
and it goes beyond China. I mean, if Trump goes
after other friendlier countries. One of the easy ways to
retaliate is if you don't want to buy American you
just don't buy American planes.
Speaker 1 (10:39):
Boeing's main competitor, Airbus, is European, and in the wake
of Boeing's repeated disasters, business has been good. Just last year,
Airbus delivered more than twice as many commercial jets to
customers as Boeing did. Meanwhile, Boeing reported its fourth quarter
earnings on Tuesday, and it had the largest annual loss
since twenty twenty. The cash train over fourteen billion dollars.
(11:03):
Ortberg told shareholders he'll be overhauling the company's portfolio to
get things back on track, and on CNBC yesterday he
sounded resolved about his collaboration with Musk and Doge on
the Air Force one project.
Speaker 2 (11:15):
The President wants a airplay sooner, and so we're working
with the a lot and the team to figure out
what can we do to pull up the schedule.
Speaker 1 (11:22):
Of that aircraft. Julie says. The company also tried to
buy itself some time last year by raising some twenty
four billion dollars in capital, so they've.
Speaker 2 (11:30):
Got a little bit of runway here, but they've also
been burning through cash at just an extraordinary pace over
the last year, like to the tune of around four
billion a quarter, and that's got to stop.
Speaker 1 (11:44):
Boeing is also still being monitored by the Federal Aviation Administration.
Trump hasn't yet appointed a new head of that agency
since its previous leaders stepped down on inauguration Day, but
Trump's Transportation Secretary pick Sean Duffy has called for tough
love and oversight when it comes to Boeing in the meantime.
In February Boeing is expected to give the US Air
(12:06):
Force an update on the Air Force one project, and
Ortberg does not want to disappoint the president.
Speaker 2 (12:13):
But some of the milestones on the plane, it looks like,
have slid and so it raises the risk that the
plane could show up really, really late during this administration
or even after he leaves office. So this is kind
of a tension point from Boeing early on, just how
do you manage this? Are there resources they could throw
(12:35):
at this and could Musk in his new capacity step
in and maybe help.
Speaker 1 (12:45):
This is the Big Take from Bloomberg News. I'm David Gura.
This episode was produced by Julia Press. It was edited
by our senior producer Naomi Shaven, Aaron Edwards, and Benedict Cammell.
It was mixed and sound designed by Alex Segura, factchecked
by Jessica bec and Andreana Tapia. Our senior editor is
Elizabeth Ponso. Our executive producer is Nicole Beemster Boor Sage
Bauman is Bloomberg's head of Podcasts. If you liked this episode,
(13:08):
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thanks for listening. We'll be back tomorrow.