A wing, a prayer, and a bailout

Boeing balances its books by going to the taxpayer well again—and selling us surplus fighters the military doesn't even want.

If, as expected, the Boeing Co. pulls out of its earnings nosedive later this year, credit will go partly to the weary taxpayers of America. "When times get tough on the commercial side," says a Boeing middle-management official, "we always have the government to fall back on." The Pentagon is expected to return more than $400 million to Boeing for military-contract "savings" brought about by the $16.3 billion buyout of McDonnell Douglas. The US also sometimes pays excessively for marked-up Boeing military parts—a 172 percent overcharge in some cases, according to a recent Defense Department audit. And Boeing hopes to eventually share in $1.2 billion from a recent lawsuit it and General Dynamics brought against the Pentagon for canceling the A-12 stealth program, even though government officials complain that the contractors were already paid $2 billion and failed to deliver a single aircraft.

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Now, in the midst of one of its worst earning periods ever, Boeing is quietly lobbying Congress to approve a whole new government bailout: $272.5 million for an aborted jet sale. The money would pay for eight F/A-18 fighter jets that Thailand ordered, then canceled in the wake of its financial collapse. A few lines of type in an appropriations bill passed by the Senate in March, and now awaiting House approval, re-route funds from an emergency bill for disaster relief and Bosnian aid to Boeing. After receiving the substituted funds, Boeing will deliver the fighters to the Marines by 2000. The upshot: Boeing completes its sale, and the government picks up the tab for weapons it never sought and apparently doesn't need.

This deal was inserted into an emergency funding bill by Republican Sen. Christopher "Kit" Bond, one of the many new, post-merger "Senators from Boeing." When Boeing acquired McDonnell Douglas, it also acquired a whole new entourage of congressional defenders. Bond's state, Missouri, is home to 20,000 McDonnell Douglas­turned-Boeing defense workers, and it is just one of 27 states that now rely to some degree on Boeing jobs.

The purchase may be a boon for Boeing and its shareholders, but David Madland, an analyst for the Washington, DC­based Taxpayers for Common Sense, denounces it as a "stealth" maneuver: "There was no pressing 'emergency' that warranted including the funds in an emergency appropriations bill designed to pay for natural disasters and [military] operations in Bosnia," says Madland. But claiming it as an emergency measure allowed Bond—who has already received $39,200 from Boeing for his 1998 re-election effort—to attach it without having to justify it on the Senate floor. The Pentagon earlier said it didn't want the airplanes and was supposed to be searching for a third-party buyer.

Bond's move came two weeks after President Clinton announced he was allowing the Royal Thai Air Force to back out of the sale and avoid a large fine (although the Thais, who have slashed their defense budget by $2.7 billion, apparently did not get a refund of the $74.5 million they paid Boeing toward what was a $392 million deal). Madland worries that shifting another country's burden to US taxpayers without debate could foretell future unchecked bailouts—maybe to the point, he says, that "defense contractors won't even need special legislation to make sure they get paid."

Boeing tends to downplay such government largesse even though, at the moment, US funds are keeping its balance sheet on the plus side. Boeing's recent announcement of comparably humble first-quarter profits of $50 million—down about 90 percent from last year—noted that its commercial division ended up $251 million in the hole while its defense, space, and information division earned $296 million. Without Pentagon funding, Boeing's quarterly profits might have fizzled. And last year its defense-contracting revenues of $9.6 billion were second only to Lockheed Martin's $11.6 billion.

Sen. Bond's office and Boeing's corporate communications director, Sherry Nebel, both declined to comment on his bailout bill. The company typically prefers not to discuss its defense work when the subject turns to bailouts and overruns. But that silence contrasts sharply with its substantial lobbying to keep those US bucks rolling in. According to the Center for Responsive Politics in Washington, DC, the company has so far paid $4 million in lobbying fees and given $750,000 to parties and candidates in the 1997-98 election cycle. With its billions in overseas sales, it's natural for Boeing to push legislation favoring commercial and military trade abroad, particularly with politically unpopular countries. It was also instrumental in helping form the powerful year-old lobbying group USA*Engage, whose representatives include Boeing senior adviser and former executive vice president Richard Albrecht. Mother Jones calls USA*Engage a strategic "front" organization for Boeing and other Fortune 500 corporations seeking to put a positive spin on business with dictatorial regimes. In one example, the magazine cites internal USA*Engage memos stating, "Boeing will contact Rev. Billy Graham ... " to enlist his support against the so-called Religious Persecution Act before Congress, which will limit US trade with nations that suppress religious freedom.

Although 60 other evangelical leaders last week urged President Clinton to support the pro-religion bill, Graham has come out against it. He argues trade restrictions harm rather than help international relations—which is also Boeing's position. Graham has also actively supported Boeing's effort to maintain China's most-favored-nation trade status, despite its history of human-rights violations—an issue shareholders raised, to no avail, at last week's company meeting in St. Louis. Asked about Boeing's wing-and-a-prayer business relationship with Graham, spokesperson Nebel told us she would, again, "pass" on commenting.

Related Links and information:

A copy of the Bond Amendment in the Congressional Record:



Boeing's homepage


USA Engage: A coalition promoting "US engagement overseas"


Missouri Sen. Kit Bond's page


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