Boeing Preps For Pentagon Cuts With Overseas Push

Date : 05/15/2012 @ 3:12PM
Source : Dow Jones News
Stock : Boeing Company (The) (BA)
Quote : 262.32  -2.43 (-0.92%) @ 12:05AM

Boeing Preps For Pentagon Cuts With Overseas Push

Boeing (NYSE:BA)
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Boeing Co. (BA) said it was prepared for more steep Pentagon spending cuts, though it expects to maintain the profitability of its big military business by securing more overseas sales.

The world's largest aerospace and defense company by sales also said some U.S. programs are being speeded up and others slowed amid continuing uncertainty over so-called sequestration, which could see the Pentagon budget cut by an additional $500 billion over the next 10 years.

Jim McNerney, Boeing's chief executive, said at its annual investor meeting that he viewed the chances of sequestration as "low", though the company is taking a conservative planning approach as defense contractors struggle to define their future size and shape because of the uncertainty over the U.S. budget.

Boeing executives have taken a more defensive stance than some rivals over the potential impact, with some companies not expecting sales or programs to be hit until next year.

Dennis Muilenburg, head of Boeing's defense, space and security business, said at the investor event that there had been "some slowing, some accelerating" of arms and systems purchases by the Pentagon.

Muilenburg said the moves varied between weapons' programs, though the army is suffering the biggest cut in resources under a revised U.S. defense strategy.

Boeing, like rivals such as Lockheed Martin Corp. (LMT), is targeting more overseas sales and wants to lift the share of international business from its current level of around 25%.

"Our sights are set on that 30% mark," said McNerney at the investor day.

He said this was based on a defense business with annual sales of $32 billion to $33 billion, though the international portion could be pushed higher if the U.S. institutes even steeper spending cuts.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com

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