US facing fresh scrutiny over close ties with Boeing

President Donald Trump. Photo / Getty Images

As a top economic adviser to President Bill Clinton, Dorothy Robyn was charged with advancing America's aerospace industry.

Part of the job was not choosing sides between companies. But there was one exception: Boeing.

"It was the one company for which I could be an out-and-out advocate," Robyn said Thursday. In competitions between American companies, the administration as a rule remained neutral. But Boeing's commercial airplane division employed tens of thousands of Americans and its prime competition, Airbus, was in Europe.

"In the engines business, you can't choose between GE and Pratt & Whitney. With Boeing, that's it. They're ours. It is the only sector where we have a de facto national champion and you can be an out-and-out advocate for it."

For Boeing's 102-year history, dating to the start of the First World War, the company and the country have relied upon one another, together creating hundreds of thousands of jobs, outfitting the United States with top military aircraft and supplying planes worldwide to allow the growth of passenger air travel and to boost US exports.

Now, however, with Boeing and US regulators facing criticism for appearing slow to react to the crash of a Boeing 737 Max 8 jet in Ethiopia, Boeing's intermingled interests with the US government are coming under new scrutiny.

There is much to examine.

For decades, US presidents have advocated for the company's interests and for the past 30 years they have done so while flying primarily on the two Boeing VC-25As that serve as Air Force One when the president is on them.

President Barack Obama hired members of the Boeing board to serve as his chief of staff and commerce secretary. Against Republican opposition, he fiercely defended the federal Export-Import Bank, which has subsidised so many airline sales to foreign airline carriers by offering loan guarantees that conservative critics have derided it as "Boeing's Bank."

"I have to say that, given the number of planes that I've been selling around the world, I expect a gold watch upon my retirement," Obama said at a Boeing plant in 2012.

President Donald Trump seemed to get off to a bumpy start with the company, criticising Boeing's Air Force One contract before entering office. But Boeing chief executive Dennis Muilenburg, while praising Trump's "business headset," pledged to keep costs down and won favor with the president.

Trump later took the unusual move of allowing Muilenburg to sit in on a phone call to an Air Force general managing the Pentagon's largest weapons program.

In December, Trump tapped a former Boeing executive, Patrick M. Shanahan, as acting defense secretary after the resignation of Jim Mattis.

And Trump's policies, including pushing for a big increase in US exports and boost in military spending, have been beneficial for Boeing, which has seen its stock price nearly triple since he took office, before coming down during this past week's crisis.

Boeing was among the top companies spending money last year trying to influence US government decision-making. The Chicago-based aerospace giant spent $15.1 million lobbying the federal government, employing about 100 lobbyists on its behalf.

On top of that, Boeing's political action committee made $2.4 million in donations to political candidates in 2017 to 2018, eighth most in the country among corporations, according to the Center for Responsive Politics. The recipients included 329 current members of Congress.

The past few years have been especially good for the company's bottom line. Boeing booked a record $101.1 billion in 2018 revenue, up 13 percent from the year before, and analysts say about a quarter of that was from government contracts. In 2017, Boeing received an estimated $23.3 billion in taxpayer-funded contract awards, not including classified military funding. And its joint ventures with Lockheed Martin and Bell Helicopter Textron received $2.2 billion and $2.5 billion, respectively, in federal contract funding in 2017.

The company's stock reached an all-time high of $446 a share this month, before falling after the crash of Ethiopian Airlines Flight 302 a week ago. It closed Friday just under $379 a share.

Daniel Auble, a senior researcher at the Center for Responsive Politics, called Boeing "an excellent illustration" of the "the undue influence of money in our political system."

In response to questions about the company's lobbying and campaign spending, Boeing issued a statement defending its practices.

"As the nation's largest exporter and a leading producer of both commercial and defense aerospace products, there are a number of significant policy issues at the federal, state and local levels with the potential to impact our business, our diverse workforce, and our supply chain. Our team is focused on telling Boeing's story and supporting policies that advance the aviation industry and US manufacturing in the communities where we live and work."

Boeing's growth has clearly benefited the United States. Boeing remains one of the country's top manufacturers, employing an estimated 153,027 people in the United States at a time when Trump has made domestic manufacturing a top political and policy priority.

Boeing serves as one of the country's biggest exporter of goods.

"Whenever the government is seeking to enhance exports, usually you're going to find that Boeing is heavily involved in whatever initiative they're carrying out," said Andrew Hunter, a defense industry expert with the Center for Strategic and International Studies. "That was true in the Obama administration, and it's true in the Trump administration."

Hunter said that in some cases, the government benefits from close relationships with private enterprise, such as when agencies work with private-sector scientists to develop new technologies.

"The risk is obviously that when agencies that are regulatory in nature work closely with a company over a long period of time, the concern is that it could undermine its independence," Hunter said.

Robyn, the former Clinton adviser, said that she became known as "Ms. Boeing" at the White House for her intervention on a range of company issues, from titanium imports to relations with machinist unions. She said the focus came from Clinton himself.

"If the Economist did an article about the Boeing-Airbus competition he would underline and it send it over to my boss...," she said. "He was all over it. And it was all about jobs."

US transportation officials are still pressing for details on why the Ethiopian Airways Boeing 737 Max 8 jet crashed. Congress is demanding answers about the Federal Aviation Administration's oversight of Boeing, especially after the FAA didn't move more quickly to ground the company's planes, instead waiting until regulators in Europe, China, Australia and elsewhere had done so.

Muilenburg spoke with Trump twice in the week after the Ethiopian crash to reassure him of the safety of the planes, giving rise to concerns that the company may have undue influence on safety questions. Larry Kudlow, director of Trump's National Economic Council, said their conversation should not be misinterpreted.

Speaking on C-SPAN's "Newsmakers" program, Kudlow said Trump delivered a stern message to Muilenburg and that the decision to ground the planes "has nothing to do with commercial considerations as far as we are concerned. And it has everything to do with safety considerations."

Acting FAA administrator Daniel Elwell on the "Today" show Friday defended the speed with which US regulators moved to ground the aircraft, saying it was not until they received additional information that they felt confident that a link between a Lion Air crash in Indonesia in October, also involving a Boeing 737 Max, and the March 10 Ethiopian Airways crash was "close enough."

"You have to establish more than a gut feeling that two crashes are related before you ground an entire fleet," he said.

U.S. deaths resulting from airplane accidents remain exceedingly rare. In a speech at an air safety forum last year, Elwell pointed out that the country has gone more than nine years, or about 90 million flights, without a fatality.

In response to questions about the agency's relationship with Boeing, the FAA issued a statement crediting it for the "current excellent safety record."

"The approach we have used over the years is the same approach that has served us well. Safety always is, and will be, our top priority."

Randy Babbitt, who led the FAA under Obama from 2009 to 2011, endorsed that view. "It used to be years ago that airplane crashes were almost a routine thing. It was like hearing about a car accident," he said. "The reason there is so much attention around the recent crashes is a testament to how safe the system is."

Boeing also has long been a stalwart aircraft provider to the US military, building nearly 100,000 planes for World War II. In recent years Boeing has pursued a wider range of military contracts, but not without controversy.

Boeing secured several large defense contracts in the fall, marking a reversal after it lost competitions to make the F-35 fighter and B-21 bomber to Lockheed Martin and Northrop Grumman, respectively.

Boeing also would be the beneficiary of more than $1 billion the Pentagon requested in Trump's 2020 budget proposal to buy eight F-15X fighter jets. Senior Air Force officials said they were opposed to the expenditure, saying the money would be better spent buying from Lockheed Martin more F-35 fighters, which, unlike the F-15X, are equipped to evade advanced air defences.

There are signs of concern about carelessness at the company, now the second-leading defense contractor in terms of federal sales, and whether the firm is meeting its obligations to the military.

On Friday, Will Roper, an assistant secretary of the Air Force, told a House Armed Services subcommittee that he visited Boeing this past week after the Air Force grew alarmed with the amount of trash, tools and other items that were being left behind in new KC-46 tanker planes Boeing was delivering.

Boeing began delivering the tankers in January, two years late and some $3 billion over budget. Foreign debris can be sucked through an aircraft's engines and damage or destroy them.

"To say it bluntly, this is unacceptable," Roper told lawmakers. "FOD, or foreign object debris, is something we treat very seriously in the Air Force. Our flight lines are spotless. Our depots are spotless, because debris translates into a safety issue."

Roper said he and other service officials reviewed Boeing's correction plan and came away satisfied. Boeing issued a statement saying: "Safety and quality are our highest priority. We are committed to delivering FOD-free aircraft to our customer and have an agreed-upon action plan in place going forward."

Shanahan, who has almost no government experience, has recused himself from issues related to Boeing. Pentagon officials did not respond to a request for comment.

The close relationship between the Pentagon and Boeing is part of a long-standing revolving-door culture in which senior defense officials move back and forth between jobs in government and with defense contractors.

In 2004, Darleen Druyun, a high-ranking Air Force procurement official, was sentenced to prison after she admitted that she approved a purchase of 100 refuelling airplanes from Boeing at an inflated price of about $20 billion to enhance her job prospects with the company. She also leaked proprietary pricing information from a competitor and helped Boeing secure a separate $4 billion as a thank you for hiring her daughter and future son-in-law.

Druyun pleaded guilty to the charges and acknowledged providing special treatment to Boeing. But court records showed Boeing executives played a role as well, pushing forward with employment discussions after Druyun suggested she needed to wait. Boeing commissioned its own review of the scandal and discovered weaknesses related to its practices for hiring former government employees.

As of 2016, Boeing employed 84 former Defense Department officials as either executives, board members or lobbyists, according to a report last year from the Project on Government Oversight. That dwarfed the 55 that Boeing competitor Lockheed Martin had on its staff.

The author of the report, Mandy Smithberger, said that revolving door raises the question of whether US officials - regulators among them - hesitate to say no to Boeing for fear of hurting their prospects if they leave public service.

"It raises the question if they are pulling their punches in order for them to protect their potential employment with the company when they leave government," she said.

Despite the current unease over Boeing's possible failures regarding the 737 Max, Trump has largely joined his predecessors in becoming a leading salesman for the company.

On an earnings call with investors in 2017, Muilenburg said of the company's relationship with the president: "We've had the privilege of having a very open dialogue with him on business issues."

Six months earlier, speaking at a Boeing plant in South Carolina in 2017, Trump ended his remarks to the crowd with this: "God bless you, may God bless the United States of America, and God bless Boeing."