Boeing’s multibillion dollar bet: Invest in new facilities now for defense payoff in future

WASHINGTON — One year after relocating its corporate headquarters to the steps of the Pentagon and subsequently restructuring its beleaguered defense business, Boeing is plowing billions of dollars into new facilities to support future combat aircraft programs that are approaching a formal award — moves that the head of the company’s air dominance division tells Breaking Defense can help “strengthen the foundation” of Boeing Defense, Space and Security (BDS). 

In an interview on the sidelines of the AFA conference last month, Steve Nordlund said that the company’s struggles on multiple fronts — a defense unit tied down by fixed-price development contracts, a commercial business still recovering from the 737 MAX crisis and pandemic disruptions that have affected the whole industry — generally make it more difficult to carry out large new internal expansions.

However, he added that those same issues also make the company’s new investments more necessary.

“I think what we’re continuing to work on now, is how do you strengthen the foundation of BDS,” Nordlund said when asked how the investments can help BDS, which the company’s chief financial officer has warned may not be profitable until the 2025-2026 timeframe, make a turnaround. “It’s hard to make large capital investments when your business is not as healthy as it could be or you want it to be,” he added. “But that’s the time that you also have to make those hard decisions, so you come out on the other side much stronger.”

Over the past year, Boeing unveiled plans for at least four facilities all geared toward future aircraft programs. Three will be in St. Louis, Mo., where the company currently builds jets like the F-15: a lab and test facility that opened in January, an advanced coatings center that broke ground in May and a nearly $2 billion expansion disclosed through public filings, though Boeing has yet to release details on the site. The fourth, an advanced composites manufacturing facility in Mesa, Ariz., opened in September 2022. 

Next-gen Opportunities

The new facilities are taking shape as the Air Force eyes an award for its Next Generation Air Dominance (NGAD) fighter, as well as a program to field an uncrewed wingman that could join it in battle. Boeing and Lockheed Martin are assumed to be competing for the Air Force NGAD program, and have also been confirmed to be vying for a next-gen fighter for the Navy. (Nordlund declined to directly comment on either of the next-gen fighter efforts.)  

For its part, Northrop Grumman is in the Navy next-gen fighter competition, but has opted to remain as a supplier for the Air Force’s NGAD. Asked whether Boeing was eyeing a similar strategy to position itself as a supplier as well, Nordlund replied, “we’ll take our capabilities wherever we can go, and at the end of the day, it’s just business.

“If there’s a good business deal that our capabilities add into a business model or equation, then you know, we’re interested,” he added.  

Nordlund also said the company is “highly promoting” open system architectures as the Air Force forges ahead with NGAD development, whose predecessor, the F-35, was at one point lambasted by now-Air Force Secretary Frank Kendall as an example of “acquisition malpractice” for entering production prematurely. The stealth fighter has disappointing readiness rates, with government officials complaining that prime contractor Lockheed has too much control over its sustainment. 

“We’re just trying to create an environment where there isn’t a vendor lock … [because] nobody wins in that environment. The warfighter doesn’t win,” Nordlund said. “It’s sad to see when the government is spending taxpayer dollars on obsolescence … And if we can take money that would normally be spent on obsolescence and apply that to better technology going forward, I think the warfighters can be better served.”

The Pentagon has also been eager to obtain more data rights of its weapon systems, with Kendall vowing that the Air Force, through NGAD, will have a “much tighter degree of government control over the future of that program than we’ve had.” Nordlund said data rights have now been elevated to a more “strategic conversation” rather than just being handled at a contracts level, which he characterized as a welcome development. 

There are “corner cases” where certain intellectual property in question strikes at a company’s “value creation,” Nordlund cautioned, emphasizing those technologies are critical for an industry player’s competitive edge. 

“We’re having great engagements with our customers. When I say great, yeah, sometimes it’s painful,” he added. “And sometimes we don’t have the answer right off the top of our head. But we’re digging in to try to figure out how we can get them what they want, which is being able to operate.”

Nordlund also addressed Kendall’s recent criticism of digital engineering, where the secretary stated that the concept was “over-hyped” in relation to Boeing’s years-delayed T-7A trainer. Kendall, however, did say digital engineering showed the ability to cut down time and cost by about 20 percent.

“When I read that, I’m like, ‘Yes! A 20 percent gain at this stage,’” Nordlund said, emphasizing that companies are only beginning to harness the power of digital engineering. “Especially as we get into true sustainment and leveraging the digital thread all the way through sustainment, I think that’s the real game changer.”

On the Air Force’s drone wingman program known as Collaborative Combat Aircraft (CCA), Nordlund said that he “like[s] their approach,” noting that though some of the service’s timelines are “a bit aggressive,” it’s still a “good challenge for the industry.”

Nordlund said Boeing “intend[s] to stay involved” in CCA, pointing to the company’s work in autonomy like the X-37 space plane along with the MQ-25 Stingray and MQ-28 Ghost Bat. Last week, the Air Force released thrust range targets for its future drone wingmen, though it’s not clear whether a candidate like the Ghost Bat could fit the criteria.

“If an MQ-25 or an MQ-28 fits the bill, great,” Nordlund said. “If it doesn’t, the great thing about our Phantom Works organization is that’s what we do. And there’s a lot of things behind the walls that people have never seen.”