Boeing CEO says tariffs risk higher costs, supply disruptions

Boeing Co. Chief Executive Officer Kelly Ortberg told employees that tariffs imposed by President Donald Trump risk driving up costs, highlighting the fragility of a finely tuned supply-chain network that now faces disruption. The tariffs would mean higher costs for certain parts purchased from Canada, such as landing gear, Ortberg said during his second companywide address to workers on Wednesday. The CEO said his bigger concern, however, is tariffs turning into “a continuity of supply issue.” [caption id="attachment_57146377" align="aligncenter" width="631"] Boeing constructs 737s at its Renton facility in Washington state. (Courtesy/Boeing)[/caption] “That’s really, really expensive for us — if we’re building our products and we don’t have the supply chain components,” Ortberg said, according to a video of the gathering that was obtained by Bloomberg News. Boeing had no immediate response to Ortberg’s remarks. Markets and companies have been whipsawed by tariff actions from the White House after sweeping duties on imports from Canada and Mexico took effect earlier this week. On Thursday, U.S. Commerce Secretary Howard Lutnick said all goods that adhere to the North America free trade pact Trump negotiated during his first term would be likely granted a one-month reprieve. Supply-chain bottlenecks have become one of the biggest issues holding back production in the civil aviation industry. Boeing’s main rival, Airbus SE, has also been forced in recent years to pare back its output ambitions as it lacks some of the millions of parts making up an aircraft. The U.S. imports almost $11 billion a year from Canada for aerospace, about half of which is Bombardier Inc. business jets, and about $8 billion from Mexico, said Kevin Michaels, an aerospace consultant who specializes in supply-chain issues. Boeing has a division in Winnipeg that manufactures aerostructures, while Pratt & Whitney Canada is a leading supplier of business-jet engines. The trade covers a wide range of other goods and services, from maintenance and repair bases to labor-intensive work such as manufacturing wiring harnesses in Mexico. If the tariffs are enforced, adding 25% to the cost of doing business for large aerospace manufacturers such as Boeing, their ability to pass the costs on to airline customers will be limited, said Michaels, who is a managing director with AeroDynamic Advisory. “The supply chain and Boeing are going to have to eat that,” he said of the higher costs. Ortberg also reiterated that the planemaker is working with Elon Musk’s Department of Government Efficiency to speed delivery of the new Air Force One aircraft for Trump. “Actually, they’ve been quite helpful for us,” Ortberg said during his Wednesday address. The Trump administration is helping the company “get some of the bureaucracy out of our way so we can get these airplanes delivered,” he said. At the same time, the CEO acknowledged that Trump has been publicly very critical of Boeing — “probably deservedly so.” Bloomberg News first reported in January that Musk had visited the site where Boeing is converting two jumbo jets into the next presidential planes, and Ortberg later confirmed that he’d met with Musk to discuss a path forward for the long-delayed, over-budget program. Trump struck a deal with Boeing for two new jets during his first administration, and has repeatedly expressed frustration over the delays. Days after touring a Boeing 747 that was formerly owned by a member of the ruling family of Qatar, he threatened to consider alternatives, including purchasing a used aircraft and converting it.

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