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Trump Says U.S. Should ‘Cancel Order’ for New Air Force One, Citing Costs

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-Agency reports

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.
Boeing officials contacted the Trump team Tuesday to discuss his remarks and told them the cost hinged on the planes’ final requirements, according to a person familiar with the discussion.
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.
‘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.’
—Obama White House spokesman Josh Earnest
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.

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