Boeing's Growler Scores a $450 Million Win… Maybe

Did lobbyists just save Boeing’s Growler?

Jun 7, 2014 at 10:01AM

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Boeing's EA-18G. Photo Credit: Boeing. 

If you're a defense contractor, it pays to build planes that the military wants. Unfortunately, sometimes the military doesn't know that it wants said planes, and that's when it pays -- literally -- for a company to have effective lobbyists. This is especially true for Boeing's (NYSE:BA) EA-18G attack plane, aka the "Growler."

Boeing takes its fight to Congress
In April, I reported that when the Department of Defense released its 2015 budget, it didn't include funding for any of Boeing's Growlers. Further, this move could have forced the closure of Boeing's production line in Missouri.

Clearly unhappy with this turn of events, Boeing decided to lobby Congress in an attempt to get them to restore $2.1 billion for 22 Growlers -- and it did so by attacking Lockheed Martin's (NYSE:LMT) F-35.

Growler

EA-18G. Photo: Northrop Grumman.

Whether you agree with Boeing's strategy or not, what's obvious is that it worked. When the House Armed Services Committee put together H.R. 4435, "The National Defense Authorization Act for Fiscal Year 2015," it included $450 million for five Growlers in fiscal year 2015. Additionally, it instructed the Chief of Naval Operations to "utilize the Advanced Procurement funds for F/A–18 E/F aircraft in FY14 ($75 million) to extend the production line to a minimum production rate of 2 aircraft per month." 

More importantly, on May 22, the U.S. House of Representatives passed H.R. 4435 with a vote of 325-98. Now, H.R. 4435 is headed to the Senate, and if it passes, and is signed by the President, Boeing will score $450 million for its Growlers.

The future of the Growler
There's no guarantee that H.R. 4435 will clear the Senate, or be signed by the President. In fact, H.R. 4435 has already elicited criticism from the White House for failing to scale down equipment programs. However, there are two very good reasons to believe that funding for Boeing's Growlers will be included in whatever defense spending bill is passed.

First, Boeing employs a number of lobbyists, and was actually the 13th "Top Spender" for lobbying in 2013, according to OpenSecrets.org. That's a trend Boeing is continuing in 2014, as it now ranks as the No. 12 "Top Spender" year to date.

Second, if Congress doesn't include funding for Boeing's Growler, Boeing may be forced to close its Missouri manufacturing line. This is something that H.R. 4435 specifically addresses as being unacceptable. Plus, Boeing argues that if its Missouri production line is closed, more than 60,000 "highly skilled jobs in 44 states" could be affected. That's probably not something either Democrat or Republican lawmakers want to be responsible for.

What to watch
Boeing doesn't need the Growler in order to survive and thrive. In fact, most of Boeing's $440 billion backlog comes from its commercial airline segment, and not defense. However, that doesn't mean Boeing is willing to give up this source of revenue -- hence the lobbyists. Consequently, while there's no guarantee that the 2015 Defense Budget will include funding for Boeing's Growler, it seems more than likely that it will. Even if it doesn't, the loss of that revenue won't devastate Boeing's bottom line.

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Katie Spence has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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