Tuesday, December 06, 2016

FLASHBACK: Barack Obama may cancel new helicopter fleet over costs

U.S. President Barack Obama takes a question during closing remarks of the Fiscal Responsibility Summit Photo: BLOOMBERG NEWS 

2:28AM GMT 24 Feb 2009 

Barack Obama has vowed to crack down on costly military programs, citing a project to build a new presidential helicopter fleet as an example of the procurement process "gone amok." 

At the conclusion of a fiscal meeting at the White House, Mr. Obama faced questions from Republican and Democratic lawmakers, including his former presidential rival, Senator John McCain. 

Mr. McCain bemoaned cost overruns in military procurement. The new fleet of 28 Marine One helicopters being built by Lockheed Martin Corp., now over budget at $11.2 billion, will cost more than Air Force One.  

Mr. McCain will introduce a bill this week to rein in military weapons programs which now routinely run billions of dollars over budget. 

Mr. Obama said "the excesses of procurement" were on his list of highest priorities. 

With the United States facing the worst economic crisis in decades, Mr Obama has pledged to review major defence programs. 

"I have already talked to (Defence Secretary Robert) Gates about a thorough review of the helicopter situation. The helicopter I have now seems perfectly adequate to me," Mr Obama said. " Maybe I've been deprived and I didn't know it."  

"It is an example of the procurement process gone amok and we are going to have to fix it." 

There was no media outcry when the above became public. Compare the below reaction to a similar announcement by President-elect Donald J. Trump. 

Trump Threatens to Cancel Air Force One Order, Boeing Stock Slips
 By Liz Johnstone and Courtney Kube
President-elect Donald Trump threatened to cancel Boeing's order for the new Air Force One in a Tuesday morning tweet, citing high costs. 
In a surprise appearance in front of reporters at Trump Tower after sending the social media message, Trump expanded on his latest target for negotiation. 
"Well, the plane is totally out of control. It's gonna be over 4 billion dollars ... and, I think it's ridiculous. I think Boeing is doing a little bit of a number," Trump said. "We want Boeing to make a lot of money but not that much money."

Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!
In response to Trump, Boeing issued a statement regarding the Air Force One program, putting the amount of their current contract at just $170 million with more phases to come. 
"We are currently under contract for $170 million to help determine the capabilities of these complex military aircraft that serves the unique requirements of the President of the United States. We look forward to working with the US Air Force on subsequent phases of the program allowing us to deliver the best planes for the President at the best value for the American taxpayer," the statement read. 
Trump spokesman Jason Miller did not answer directly how Trump knew the price of the new Air Force One, but according to the latest figures, Trump is likely correct about the eventual $4 billion price tag, which would be paid out over the next decade or more. Research and development is already at $2.7 billion for the first two years, a number that is already budgeted and approved, and the Government Accountability Office warned last year that the cost would be approximately $3.2 billion. By the time the aircraft is delivered, the total cost will likely be over $4 billion, because the government still has to buy the two aircraft once they are built. 
Air Force One is so much more expensive than commercial planes because of the communications package and air defense measures. Boeing was the only choice for the build because it's an American company and they have the only four-engine aircraft, a necessity due to the weight. 
Keeping the old Air Force One is an option, but not an ideal one. The plane has a lifespan of about 30 years, and the current ones are in their late 20s. As the planes age, safety becomes a concern while maintenance and other costs increase.
It's not clear what prompted Trump to threaten the aircraft manufacturer with the cancellation of its government contract. Following his tweet, Boeing stocks slid by more than 1 percent in premarket trade, according to CNBC.
Before the tweet, stocks were trading at $152.16. Shares fell to a low of $149.75 immediately after the tweet, approximately a $1.48 billion hit to Boeing's market cap — not a large impact relative to Boeing's overall market cap, but a dip nonetheless. Shares came back some since Trump tweeted, and opened at $150.85. By midday trade, Boeing's stock was down 86 cents, according to MarketWatch. 
Trump formerly owned stock in Boeing, Miller said on a transition call Tuesday, but sold it in June 2016 along with all other stocks he held.  
Exactly how Trump will take on the price of the plane, Miller said, "We can get into that more after the president-elect is sworn in on January 20."  
In 2009, President Obama canceled Lockheed's order for a new Marine One, a 23-helicopter program with ballooning costs.  
"The helicopter I have now seems perfectly adequate to me," President Obama said at the time. 
 Air Force One waits on the tarmac at Andrews Air Force Base, Md., on Dec. 6, before President Barack Obama boards en route to MacDill Air Force Base in Tampa, Fla.
- Carolyn Kaster / AP