Originally Posted by
CONSO
IMHO - Boeing used the gillette razor blade marketing method. Give the basic unit at ' cost' or ' less' and make make your money on the replacement ( blades ), in this case the multi year modiication, srework, impovement, repair, etc - to go on for the next 50 years or so .
That's exactly what it was. But it required very deep pockets and accepting big risk. Boeing won the contract in February 2011. Here we are eight years later and Boeing has not only made no money on the program, but has
lost around $4 billion. What company could afford such a huge investment with a payback measured in decades? (picture the hypothetical razor company investing $4B and not making a profit on the hypothetical blades for a decade.) And it's still risky, USAF can still back out of buying more tankers. USAF can decide to buy tanker services rather than buy tankers for organic tanker support. Indeed Lockheed and Airbus have just teamed up to provide such services. The "multi-year" support contract can go to someone other than Boeing. And there are plenty of other risks.
And there are other serious
internal factors to consider. Boeing is made up of three divisions: commercial, military, and global support. The plane is being built by Boeing Commercial, but it's a military contract. Which division gets the profit? Can you imagine being the president of the military division who signs the contract and takes the risk, while the commercial division gets all the profits for building the product (if and when they finally appear?) That's why Northrop Grumman pulled out. The economics made no sense to them because they would take on too much risk while not getting enough profit to offset the risk. Now let's assume the Boeing Global Support division gets the support contract. How does the commercial division share in those profits? The military division? It's very very easy to talk about "One Boeing", but actually doing it is massively difficult.
Let me provide a real world example of how difficult this is. The KDC-10 contract was won by Douglas Aircraft. But they were required (by corporate McDonnell Douglas headquarters) to accept a significant loss on the project. Why? So the Dutch would buy McDonnell Douglas AH-64 Apache helicopters. And the Dutch did indeed buy Apaches. But the losses prevented Douglas from developing new airliners, including the MD-12. Bottom Line? Douglas literally no longer exists. Most of the Douglas plant in Long Beach has literally been bulldozed. Meanwhile the helicopter division in Mesa where the Apache is built is going gangbusters. Does the (former) president of Douglas think this was a good outcome? What think you?