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President Obama's signing of the $633B National Defense Authorization Act - a controversial...

President Obama's signing of the $633B National Defense Authorization Act - a controversial measure that delays pending cuts to Pentagon spending and the 2013 military policy bill - throws a lifeline to defense contractors, as it authorizes funding for projects such as Boeing's (BA +0.7%) CH-47 helicopters and General Dynamics' (GD +0.1%) DDG-51 destroyers. The two-month sequestration delay sets a new March 1 deadline for passage of at least $1.2T in deficit-reduction measures needed to turn off the defense and domestic sequestration cuts.
Comments (10)
  • And the beat goes on.
    3 Jan 2013, 12:10 PM Reply Like
  • Cuts what cuts....where are the ratings agencys
    3 Jan 2013, 12:28 PM Reply Like
  • Can you hear the sound of the can being kicked?
    3 Jan 2013, 01:08 PM Reply Like
  • That darn socialist Obama is building up the military for total and complete totalitarian control of the country! Oh no!




    So anyway, more evidence of just how middle-of-the-road Obama is in reality, as opposed to what the crazies think.
    3 Jan 2013, 01:51 PM Reply Like
  • kmi


    Actually Obama is right wing with the military and left wing with social and fiscal policies. Hate to bog you down with details.
    3 Jan 2013, 02:04 PM Reply Like
  • I got it!


    So he is a right wing fascist and a left wing communist, a totalitarian of many stripes and colors, a peacock of authoritarianism!


    It's always the details that get you in the end, isn't it?
    3 Jan 2013, 03:35 PM Reply Like
  • He has disappointed the far left on military issues and the far right on fiscal issues. I really don't care that it breaks your little categories and cubby holed world. Apparently your thinking is too narrow to adjust.
    3 Jan 2013, 05:01 PM Reply Like
  • Perhaps you missed the sarcasm, or elected to wholesale ignore the part where I said Obama was very middle-of-road.
    4 Jan 2013, 07:40 AM Reply Like
  • Defense budget cuts will be an issue in the upcoming budget talks. I am sure Mr. Obama wants the leverage.


    The senate and house are like fools running up credit card debt. They won't stop until no one will loan them money.
    3 Jan 2013, 10:31 PM Reply Like
  • This article is completely wrong from Boeing's point of view. I am not going to come out and saying Boeing was hoping for the defense cuts but I can bet they wouldn't have lost any sleep. First some history. I worked for Boeing for several years most recently on the USAF Tanker program but have since left the company. I have nothing personal against Boeing. I enjoyed my time there and unlike SPEEA and other unions that are constantly fighting Boeing, I think my pay and benefits were top notch. This was confirmed when I was doing a job search to move on. My wife, also an engineer, and I received several offers from around the country. Not one offer was an improvement over our current position when adjusted for cost of living. Some offers were even a decrease despite the fact the cost of living was higher. I simply had no issues with Boeing but my job was being relocated and I wasn't interested in moving to the new location. I'm not at all disgruntled but having worked there, I followed all of the news more than the average news person or investor.


    As I said, I was working the USAF Tanker and I can tell you as Boeing as stated publicly, "the schedule is tight but achievable." Where have you heard that before? The 747-8i, 787, Italian and Japanese Tankers just to name a few programs. Despite being "achievable", all of them ended up YEARS behind scheduled. To be fair, Airbus wasn't any better. Just look at their A380, A350, A400, and Australian tanker (which had parts fall off in mid-air and damage a plane being refueled). Developments are extremely expensive and technically difficult.


    So why would Boeing "want" the defense cuts? Part of those cuts would have come on the USAF Tanker program. Any cuts to that program would allow Boeing to renegotiate the existing firm fixed price contract. The United States Air Force even warned Congress that they got a great deal on these tankers and cutting the program and allowing Boeing to renegotiate now as a sole source with the competition over would be devastating. Boeing already knows they are $500 MILLION over budget which they could try and get some back as well as grab some schedule relief. NOW THAT WOULD BE A LIFELINE FOR BOEING! The USAF knows it. They warned Congress about it. Sure, Boeing would take some temporary hits in other programs like maybe the V-22 or CH-47 but most likely they would be temporary until funding was returned or alternative sources were found. Even if they were permanent, the hit to those programs is nothing compared to the $30 BILLION tanker program.


    I share this not to give Boeing a bad name because they haven't done anything wrong with respect to this and I could be wrong. They could accept the cuts and not renegotiate the FFP contract but I find that horribly unlikely. You are over budget and on a tight schedule. Who wouldn't take relief? I only bring this up to help educate investors considering Boeing. This is a company with a ton of risk right now trying to get the 787 fully up, 737 MAX, USAF Tanker, and 777 eventually is a lot of R&D cost and risk without any good recent history to point to. Add to it ongoing labor issues including the current SPEEA (engineering... i.e. the people doing the design and development on the tanker and 737 MAX) negotiations in the State of Washington which are not going well at all and new competition challenging the 737/A320 duopoly. I wouldn't touch the stock at these levels and I wouldn't consider this 2 months delay good news.


    Disclosure: I have a bearish short term option spread open on Boeing because of the issues highlighted above.
    3 Jan 2013, 11:13 PM Reply Like
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