BLITZ BUREAU
BOEING is in talks with the US Defense Department over how the planemaker’s planned guilty plea could affect its extensive government contracts, a person briefed on the matter said.
Court filing
Earlier, the Justice Department said in a court filing that Boeing had agreed to plead guilty to a criminal fraud conspiracy charge to resolve an investigation linked to two 737 MAX fatal crashes in 2018 and 2019 that killed 346 people. A guilty plea potentially threatens the company’s ability to secure lucrative government contracts with the likes of the U.S Defense Department and NASA, although government agencies can waive any restrictions. Final details of the deal are expected to be filed by July 19.
Pentagon spokesperson Air Force Major General Patrick Ryder told reporters the agency would make an assessment to decide the impact of the guilty plea on Boeing’s contracts. He did not address whether the agency was in talks with the planemaker. “DOD will assess the company’s remediation plans and agreement with the Department of Justice to make a determination as to what steps are necessary and appropriate to protect the federal government,” Ryder said, adding any actions would be under U.S. government contracting regulations. Boeing and the Justice Department had no immediate comment. NASA also declined to comment. Boeing shares pared early gains and closed up 0.6%.
Boeing’s Defense and Space unit is vital to its business, with $7 billion in first-quarter sales, up 6% from a year ago.
Government contracts
In its annual report, Boeing said US Government contracts represented 37% of last year’s revenue including foreign military sales. A government report said Boeing had $14.8 billion in Pentagon contracts in 2022. The financial costs tied to the plea appear ‘manageable relative to the company’s scale and overall obligations,’ said Ben Tsocanos, airlines director at S&P Global Ratings. “We expect that Boeing will likely continue to be a key supplier of defense and space products following the guilty plea,” he added.
