Boeing revamps defence, space unit to tighten programs

By Andrea Shalal

WASHINGTON (Reuters) - Boeing Co (BA.N) on Wednesday announced a major restructuring of its defence and space business to tighten oversight of the troubled $52 billion KC-46A aerial tanker and other key development programs, cut costs and keep programs on schedule.

Chris Chadwick, president and chief executive officer of Boeing's $31 billion Defense, Space & Security business, or BDS, said a new organisation would oversee six key development programs, just as Boeing has a separate group to oversee development of new commercial airplanes.

"This BDS Development organisation is the next step in breaking the cost curve on our programs,” Chadwick said in a statement. He said the move would allow Boeing to "more effectively apply engineering expertise, development programme best practices, and programme management and integration from across Boeing to our most important development activities.”

Boeing said Jim O'Neill, head of the defence division's Global Services & Support unit, will run the new organisation. Leanne Caret, chief financial officer of Boeing defence, will take over O'Neill's job, and she will be succeeded by Jim Zrust, Boeing's top tax official.

"This is a major structural change, but it's also a major philosophical change," said Boeing spokesman Todd Blecher.

He said the restructuring would help Boeing's defence and space business focus on four core missions: creating new opportunities, executing development of key programs, producing weapons, and supporting them once fielded.

Creating a new group focussed on development would allow Boeing to lower risks on key new programs, and rapidly shift engineers to look at potential issues.

The move comes amid growing concern about Boeing's ability to meet the August 2017 target for delivering 18 new KC-46A refuelling planes to the U.S. Air Force after a series of technical and integration challenges.

In addition to the tanker programme, BDS Development will oversee the Air Force's programme to build a new presidential aircraft; Boeing's work on a commercial crew vehicle to ferry astronauts to the International Space Station; NASA's Space Lauch System rocket; Boeing's 502 small satellite effort; and the defence unit's work on the rudder, folding wing tips and other components of the 777X commercial airliner.

Byron Callan, defence analyst with Capital Alpah Securities, said the move signalled Boeing's determination to get a grip on the tanker programme, where higher costs have dampened the defence unit's performance.

"It suggests that problems with tanker were a bigger issue than a lot of the Street had recognized," he said.

(Reporting by Andrea Shalal; Editing Bernard Orr)