Integrated Defense Systems
Transcript of Integrated Defense Systems
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Integrated Defense Systems
Jim AlbaughExecutive Vice President, The Boeing Company President and Chief Executive Officer, Integrated Defense Systems
May 17, 2006
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Annual Investor Conference | Integrated Defense Systems
$31.1B2005 Revenue
Integrated Defense Systems
Realigned organization
Validated strategy
Solid revenue base
Industry-leading margins
Focused on cost and execution
Manageable risk
40%
43%
17%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
Balanced portfolio; focused on executionBalanced portfolio; focused on execution
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IDS 2005 Performance
2005
Revenue $31.1B
Operating Earnings* $3.9B
Operating Margins* 12.6%
Adjusted Operating Margins** 10.8%
* Includes Rocketdyne Power & Propulsion (RPP) divestiture** Excludes RPP divestiture
Delivering solid revenue and double-digit margins
Robust defense portfolio
Industry-leading backlog
Continuing focus on execution
Strong financial engineStrong financial engine
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IDS 1Q 2006 Performance
1Q06
Revenue $7.2B
Operating Earnings $0.8B
Operating Margins 11.4%
Focus on execution drives margin expansionFocus on execution drives margin expansion
Delivered 27 production aircraft
Definitized FCS contract conversion
Completed P-8A PDR
Executed two GMD tests
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IDS 2005-2006 Highlights Video
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Raising the Bar
Improve execution and productivity
Enhance customer intimacy
Deliver timely capability-based solutions
Reduce cost and complexity
Position IDS for sustainable, long-term profitable growthPosition IDS for sustainable, long-term profitable growth
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Market Environment – Budget Realities
Recent spending is well above the long term growth trend
Multiple top-line pressures given other domestic priorities
Many accounts are oversubscribed, especially aviation
Fewer new starts, must have near-term relevance
Competition for markets, programs, and talent intense
Moderating budget; fierce competition for growthModerating budget; fierce competition for growth
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Market Environment – QDR TransformationDoD Moving to Joint Service Capabilities
New Strategic EnvironmentPast
Single Service Acquisition
Threat-based Planning
Service – Concepts of Operation
Forces That Need to Deconflict
Ships, Guns, Tanks and Planes
Vertical Integration
Joint Portfolio Management
Capabilities-based Planning
Joint Operation
Integrated and Interdependent Forces
Information and Knowledge
Horizontal Integration
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PrecisionEffects
PrecisionEffects
GlobalMobilityGlobal
Mobility
IntegratedISR
IntegratedISR
IntegratedC3
IntegratedC3
SpaceExploitation
SpaceExploitation
IntegratedLogistics
IntegratedLogistics
IntegratedTraining
IntegratedTraining
Customer – Enduring Capabilities
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Market Environment – Summary
Spending money in different ways
Jointness and interoperability dominant QDR themes
Customer focused on capability based solutions
Cost and performance are major discriminators
Competition increasing as market growth slows
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Customer – Boeing’s Portfolio Alignment
Network &Space
Systems
Network &Space
Systems
JDAMJDAM
SDBSDB
AEW&CAEW&CC-17C-17
F-18F-18
ApacheApache CH-47CH-47
J-UCASJ-UCAS MMAMMA
TankersTankers
Classified ShuttleShuttle
ISSISS
SatellitesSatellites
Sea LaunchSea Launch
DeltaDelta
JTRSJTRS
FAB-TFAB-T
FCSFCS
TacticalLasers
TacticalLasers
PAC-3PAC-3
ABLABL
GMDGMD
PrecisionEffects
PrecisionEffects
GlobalMobilityGlobal
Mobility
IntegratedISR
IntegratedISR
IntegratedC3
IntegratedC3
SpaceExploitation
SpaceExploitation
IntegratedLogistics
IntegratedLogistics
IntegratedTraining
IntegratedTraining
SupportSystemsSupportSystems
PrecisionEngagement
& MobilitySystems
PrecisionEngagement
& MobilitySystems
C-17 GSPC-17 GSPMaintenance,
Modifications & Upgrades
FIRSTFIRST
Integrated LogisticsTraining Systems
and Services
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Business Organization Drives Execution and Productivity Improvements
Aligns like capabilities in single organization
Consolidates domain knowledge
Clear responsibility, authority, and accountabilityfor execution
Reduces complexity and cost structure
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IDS Strategic Imperatives
Chart the CourseSet High ExpectationsInspire OthersFind a WayLive the ValuesDeliver Results
Program Management BPSystems EngineeringSupplier ManagementEnhanced Cost StructureCorporate Initiatives
Customer IntimacyCapabilities-based SolutionsNetwork-enabled SolutionsEnhance Existing PlatformsPerformance-based LogisticsBest of IndustryGrow Beyond the Core
Lead Effectively Execution/ProductivityShape and Grow
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Continuing to Drive a Culture of Execution and Productivity
IDS Focus Areas• Program Management• Supplier Management
and Quality• Systems Engineering
• Cost Structure
Lean +
Global Sourcing
EffectivenessDevelopment Effectiveness
and Productivity
Support Services Excellence
Improvements fuel long-term competitivenessImprovements fuel long-term competitiveness
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Global Sourcing InitiativeMission and Charter
CharterLeverage the buying power of Boeing
Shape the supply chain for performance
Reduce Transaction Costs
Reduce Cycle Time
MissionDevelop an integrated sourcing plan that improves productivity and efficiency, leading to higher quality
products and services at reduced cost for our customers.
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Daily• Customer call• Schedule status• Calendar• Tactical priorities• Issues/Help
needed• Program
Leadership tagup
Weekly• Communications
look ahead• Program Manager
Review• Change Control
Board• Risk/Opportunities
Board• Progress Report
CONOPS – Battle Rhythm
Monthly• President’s Program
Review• Business
performance review• VSP review• Functional review• Strategy review• NBF review• Leadership Team
Meeting
Quarterly• CEO Reviews• Program reviews• EAC reviews• IDS reviews• Functional
Performance Reviews
Annually• Executive Mtg.• LRBP• Strategic
Planning Cycles• Leadership
Excellence Training
• VSP Goals and Objectives
LeadershipLeadershipPrinciplesPrinciples
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Employee Involvement
100% of IDS in TeamsProduction Operations
3,101 EI Teams$143,000 averagesavings/team ‘05$170M ‘05 savings
Program TeamsRecord ’05 Performance
All Managers trained in Team Leadership
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Lean is Paying Off
F/A-1880% unit cost reduction/55% reduction in throughput time20% increase in capacity and rate while reducing footprint90% reduction in defect rate
Apache85% reduction in hours/aircraft in final assembly69% reduction in flow days90% reduction in defect rate
JDAMUnit labor cost reduced from >8 hours to <2 hours>50% reduction in total production cost67% reduction in scrap/75% reduction in rework hours
C-1745% reduction in final assembly hours28-day reduction in flow75% reduction in defect rate
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Also:Expand the Core
Capability-based solutionsPerformance-based logisticsInternational
Create new coresAdjacent marketsMarket shapingPrudent acquisitions
Continue to:Improve operational efficiency and effectiveness
Leverage our legacy platforms
Provide network-enabledsolutions
Offer Best of Industry
Assessing our strategy and discriminators
Meeting our customers’ evolving needs
Cost and cycle time –Next source of competitive advantage
Cost and cycle time –Next source of competitive advantage
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Outstanding Program Execution
Meeting customer needsMeeting customer needs
C-17 and support
• Delivered 150th aircraft of 180 ordered
• Providing excellent support of GWOT (92% departure reliability)
F/A-18E/F and support
• Delivered 271 aircraft of 489 ordered
• Largest US Navy Performance Based Logistics Contract
Ground-based Midcourse Defense
• 11 interceptor silos in "alert capable" status
• Sea-based X-band radar transitioning from Hawaii to homeport
• Interceptor and Radar Certification tests successful
Future Combat Systems
• OTA to FAR conversion definitized(total SDD contract: $21B)
• SoSIL opened• On schedule and cost
P-8A (Multi-mission Maritime Aircraft)
• Preliminary Design Review completed
• BCA Critical Design Review completed
• On schedule and cost
Chinook and support
• Delivered 31 aircraft of 513 programmed
• Expanded into the international market with Performance Based Logistics Contract via UK TLCS
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Historical Revenue Growth
Major program wins drive revenue growth and backlogMajor program wins drive revenue growth and backlog
Focused on customers’ enduring needsLeveraging legacy platform expertiseFocus on delivering network-centric capabilities
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Efficient Operations Driving Margins
Focus on execution paying dividendsFocus on execution paying dividends
Continuing to employ lean operationsDriving systems integration deeper into organizationExecuting balanced development programs
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* Excludes Delta IV manifest charge
**Excludes gain from Rocketdyne sale
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2006 revenue ~$31.5B
2007 revenue ~ 2-5% growth
2006 margins ~10.5%
2007 margins >10.5%
Integrated Defense Systems
40%
43%
17%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
Solid revenues, excellent profitabilitySolid revenues, excellent profitability
$31.1B2005 Revenue
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43%
Airlift & TankerAirlift & Tanker
Global StrikeGlobal Strike
Based on 2005 revenues
ExecuteF/A-18E/F and EA-18GF-15F-22AApache, ChinookJDAM, Small Diameter BombC-17V-22Unmanned Air SystemsP-8A (Multi-Mission Maritime Aircraft)AWACS and AEW&C
CaptureInternational Fighter and AEW&CUSAF TankerNext Generation Fighter/BomberCombat Search and Rescue Helicopter (CSAR-X)
Rotorcraft
Rotorcraft
ASW & ISR
ASW & ISR
2005 2006ERevenue $13.5B $14.0BMargins 13.0% 13.0%
Network & Network & Space SystemsSpace Systems
SupportSupportSystemsSystems
Precision Engagement and Mobility Systems
Moderate growth with continued strong marginsModerate growth with continued strong margins
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40%Com
bat S
ysS&ISS&IS
MissileDefenseMissileDefense
ExecuteFuture Combat SystemProprietaryJoint Tactical Radio – Cluster 1Ground-based Midcourse DefenseAirborne LaserSpace Shuttle, International Space StationDelta II, Delta IV/EELVMilitary and Commercial Satellites
CaptureTransformational CommunicationAMF JTRSProprietaryCrew Exploration VehicleEELV Buy IIICommercial Satellites
Based on 2005 revenues*
C3C3Space Exp.
2005* 2006ERevenue $12.3B $11.5BMargins 7.0% 6.0%
SupportSupportSystemsSystems
Network and Space Systems
*Excludes Rocketdyne 2005 sale
Moderate growth with high single-digit marginsModerate growth with high single-digit margins
Precision Precision Engagement & Engagement & Mobility SystemsMobility Systems
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17%SupportSystemsSupportSystems
ExecuteC-17 Globemaster SustainmentPartnership (GSP)C-130 AMPF/A-18E/F supportC-130 Gunship supportB-52 CONECT
CaptureMMA fleet supportC-17 GSP Follow-onV-22 supportInternational
Based on 2005 revenues
2005 2006ERevenue $5.4B $6.0BMargins 14.3% 13.5%
Precision Precision Engagement & Engagement & Mobility SystemsMobility Systems
Network & Network & Space SystemsSpace Systems
Support Systems
Growing business with continued strong marginsGrowing business with continued strong margins
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Robust Portfolio
DevelopmentP-8A (MMA)Airborne Early WarningMILSATCOMFuture Combat SystemsFuture Imagery ArchitectureSBSSMUOSISATJTRS C1AMF JTRSGround-based Midcourse DefenseABLEA-18GJ-UCASSmall Diameter BombC-130 AMP
ProductionC-17ChinookV-22F/A-22F-15F/A-18E/FApacheJDAM/HarpoonLaunch VehiclesCommercial SatellitesInt’l Tanker
SupportAWACSSpace Shuttle/ISSLifecycle Customer SupportC-130 AMPC-17 SustainmentF-18
Near-Term Competitions
InternationalUSAF TankersProprietaryCSAR-XCEVSDB II
Concept StudiesTSATATLGPS III
Outstanding mix… backlog >2.5x revenueOutstanding mix… backlog >2.5x revenue
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Right organization
Right leadership team
Right strategy
Summary
Positioned for profitable long-term growthPositioned for profitable long-term growth
37%
44%
19%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
$31.5B2006E Revenue
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