Boeing in Talks to Preserve US Government Contracts Business

(Bloomberg) -- Boeing Co. is discussing a potential path forward with the US Defense Department to preserve its government contract business after the company agreed to plead guilty to a criminal charge tied to two fatal crashes of its 737 Max jet, according to a person familiar with the discussions.

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A Pentagon spokesperson separately said on Monday that the department will assess the plea agreement and related matters to “make a determination as to what steps are necessary and appropriate to protect the federal government.”

The talks come after Boeing’s guilty plea risked calling into question the viability of such contracts. Boeing’s defense, space and security division accounted for about a third of the company’s total revenue last year.

The government contracts are more important than ever as it relies on its defense division to counteract plunging revenue at its commercial airplane business. The person who confirmed the talks, which were reported earlier Monday by Reuters, asked to remain anonymous to discuss the private conversations.

Boeing reached an agreement in principle with the Justice Department early on Monday, under which the company would plead guilty to criminal conspiracy in connection with the Max crashes in 2018 and 2019 that killed 346 people. As part of the deal, which requires court approval, Boeing would pay a fine and agree to install a corporate monitor for three years.

The agreement was reached after the government determined the company had violated a prior 2021 deal struck in the waning days of the Trump administration.

While the situation Boeing faces is rare, it’s not unprecedented. The Defense Logistics Agency, which oversees the Pentagon’s supply chain, issued a formal determination in 2008 that Siemens AG remained a responsible contractor for US government business and was still eligible for public procurement deals, even after the company pleaded guilty to violating US anti-corruption laws.

Boeing could also seek waivers from government agencies. It’s currently unclear how the issue might be resolved.

--With assistance from Brooke Sutherland.

(Updates with Pentagon statement from second paragraph.)

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