By Doug Cameron and Damian Paletta
President-elect Donald Trump, escalating his carrot-and-stick
approach to the nation's manufacturing sector, on Tuesday called
for canceling Boeing Co.'s work on a new version of Air Force One,
asserting that the company was trying to rip off taxpayers.
"The plane is totally out of control," Mr. Trump said in brief
remarks in the lobby of Trump Tower in New York City. He added: "We
want Boeing to make a lot of money but not that much money."
Using Twitter, Mr. Trump said the cost for new planes for future
presidents was "more than $4 billion. Cancel order!"
While the White House and others pushed back on the $4 billion
estimate used by Mr. Trump, defense experts said it was too early
to identify the final tally until the Pentagon, the White House and
the Secret Service had decided what equipment to install on the
fleet of up to three jets.
Mr. Trump's broadsides were the latest example of his unusually
aggressive style and personal intervention in corporate
decision-making that has caught the attention of numerous
executives around the country looking for clues about how he will
govern.
In recent days, Mr. Trump has threatened to impose a 35% tariff
on companies that move jobs overseas and then ship goods into the
U.S.
On Dec. 1, he announced that the Carrier unit of United
Technologies Corp. would retain 800 jobs in the U.S. after he
pressed the company not to move certain operations to Mexico. On
Dec. 2, he chided valve maker Rexnord Corp. about its plans to move
some operations to Mexico.
Senior Trump transition officials have scheduled a meeting next
week with top Silicon Valley executives, some of whom had been
criticized by Mr. Trump during the campaign. Mr. Trump floated the
idea of boycotting Apple Inc. after reports that the company
wouldn't decrypt a phone as requested by the Federal Bureau of
Investigation during its probe into a 2015 terrorist attack.
Mr. Trump on Tuesday also met with SoftBank Group Corp. Chairman
Masayoshi Son, a Japanese billionaire who said he would invest $50
billion in the U.S. and create 50,000 new jobs. The money is coming
from a fund established in October that SoftBank is forming with
Saudi Arabia. Separately, some investors and analysts have said Mr.
Son could now try to revive an abandoned effort to merge Sprint
Corp. -- which Mr. Son's conglomerate controls -- with T-Mobile US
Inc. Regulators had raised questions about such a deal.
Many business executives have praised parts of Mr. Trump's
agenda -- such as tax reform and infrastructure investment -- that
they believe will help the economy grow. But some of his trade
plans, particularly proposed tariffs on imports from China and
Mexico, have worried executives, who have taken notice of his
tendency to single out companies.
"Some of us may share our turn in the bull's-eye," Caterpillar
Inc. Chief Executive Doug Oberhelman told reporters on a conference
call Tuesday.
Senior advisers to Mr. Trump have signaled that he plans to
continue intervening in issues that pertain to specific businesses
as he sees fit once he is sworn in on Jan. 20.
Mr. Trump's remarks regarding Air Force One mark the first time
he openly attacked a company by threatening to block a procurement
contract. It is likely to send signals to other government
contractors about his future involvement in their bidding.
"As a general rule, government procurement experts on both
sides, the government and the contractor-side, will be extremely
anxious," said Steven Schooner, co-director of the government
procurement law program at George Washington University Law
School.
Chicago-based Boeing hasn't yet secured deals to build the
planes that would replace the current aircraft used as Air Force
One, which have been in flight since the administration of George
H.W. Bush.
The two heavily modified 747-200 planes currently used by the
president are due to reach the end of their planned 30-year life in
2017. This can be extended a few more years, and the Air Force has
said in budget documents it wanted to have the first new jet in
place by 2024.
Vice president-elect Mike Pence told CNN that Mr. Trump based
his $4 billion assessment of the contract's price on information he
recently received and that his understanding was that it "can
grow." He described Mr. Trump as a "businessman who knows how to
sharpen his pencils."
Boeing said Tuesday it has so far received development deals
worth about $170 million to convert the 747-8 jumbo jets that would
replace the existing fleet.
"We look forward to working with the US Air Force on subsequent
phases of the program," the company said.
The Pentagon said it has budgeted $2.7 billion through 2021 to
develop the new presidential fleet, as well as another $300 million
for the construction of new hangars. This excludes the cost of
acquiring the actual jets, which carry a list price of $378 million
each. Experts said the Pentagon will likely pay far less than that
and part of Boeing's existing work is to reduce risk and trim the
current budgeted development spending.
"The statistics that have been cited [by Mr. Trump], shall we
say, don't appear to reflect the nature of the financial
arrangement between Boeing and the Department of Defense," said
Obama White House spokesman Josh Earnest.
Mr. Trump, who flies in a Boeing private jet, criticized the
company during the election campaign and accused it of planning to
move jobs to China, a charge it denied.
Efforts to replace the fleet of aircraft and helicopters that
serve the president have come under attack by previous
administrations and even been canceled. The Pentagon is now looking
to balance costs and capabilities by rewarding contractors with
higher profits if they deliver on time and under budget.
Boeing is the second-largest Pentagon contractor after Lockheed
Martin Corp. -- which is building the fleet of new helicopters that
will serve as Marine One -- and makes fighter jets, surveillance
planes, bombs and other systems that generated sales of almost $19
billion from the Pentagon last year, a fifth of its total
revenues.
--Carol E. Lee contributed to this article.
Write to Doug Cameron at doug.cameron@wsj.com and Damian Paletta
at damian.paletta@wsj.com
(END) Dow Jones Newswires
December 06, 2016 19:46 ET (00:46 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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