Trump Picks Boeing Executive Shanahan for Pentagon’s No. 2 Post

Updated on
  • Shanahan helped straighten out the 787 Dreamliner program
  • Defense Department would see 10% increase under Trump budget

President Donald Trump tapped a Boeing Co. executive to serve in the Defense Department’s second-highest role, strengthening already close ties between the largest U.S. exporter and the new administration.

Patrick Shanahan, 54, a Boeing senior vice president, was nominated to become deputy defense secretary, according to a White House statement Thursday. If confirmed by the Senate, Shanahan would have to recuse himself from Boeing-related issues for two years, under administration policies.

Patrick Shanahan

Source: Boeing

Shanahan, an engineer by training, is a rising star at Boeing, reporting directly to Chief Executive Officer Dennis Muilenburg. He has 30 years of experience at the company across its key military, space and commercial aviation businesses but made his mark in 2007, when he was assigned to help fix cascading development issues that left the 787 Dreamliner years behind schedule.

Chicago-based Boeing -- the second-biggest U.S. government contractor, after Lockheed Martin Corp. -- has enjoyed a cozy relationship with the Trump administration after an initial rocky start. After Trump unleashed a Twitter salvo in December complaining about potential costs for Boeing’s project to develop a new Air Force One, Muilenburg seized the opportunity to start a dialog with the newly elected president.

Paying Off

The subsequent discussions at New York’s Trump Tower and the president’s Mar-a-Lago resort in Florida appear to have paid off. The White House budget proposal unveiled Thursday includes more funding for Boeing’s F/A-18 Super Hornet fighter and Apache helicopters, while preserving funding for the Export-Import bank, which helps finance the planemaker’s international sales.

“What this means for Secretary Mattis is that he will have a competent, detail-oriented operator managing the Pentagon on a daily basis,” said Loren Thompson, a defense analyst at the Lexington Institute, a nonprofit that has received funding from companies including Boeing.

Read about Trump’s $639 billion Defense Department budget proposal

Muilenburg in April promoted Shanahan to his current post as senior vice president for supply chain and operations, adding him to the company’s executive council. The two had been friendly rivals as they rose through the ranks of Boeing’s defense business, which Muilenburg ran before becoming CEO in 2015.

By gaining Trump’s ear, Muilenburg has won a powerful advocate for Boeing’s long-in-the-tooth F/A-18. The fighter jet will help fill a shortfall for the Navy while it awaits Lockheed’s delayed F-35s to be certified. 

Twitter Post

“Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!” Trump said in a December tweet. He put Muilenburg in a potentially awkward situation in January by phoning the general who manages the Lockheed program while the Boeing executive was present.

Defense Secretary Mattis has asked Deputy Defense Secretary Robert Work -- an Obama administration holdover who is staying until his successor is confirmed -- to supervise a review that compares the F-35C and the F/A-18 and assess whether improvements could be made to the latter to “provide a competitive, cost effective, fighter aircraft alternative.”

Under Trump’s proposed budget outline, the Pentagon would receive a $52.3 billion, or 10 percent, increase for the year that begins Oct. 1. The budget includes $13.5 billion to procure additional aircraft, including $4 billion for Boeing’s F/A-18.

“Boeing would thus look to be the major winner in terms of additional orders, followed by Lockheed Martin,” Robert Stallard, a defense analyst with Vertical Research Partners, said in a note to clients.

Pentagon Jobs

After facing difficulty and delays in filling Pentagon positions, the White House unveiled several defense-related appointments Thursday, including David Norquist, a partner with Kearney and Co., as under secretary of defense, comptroller; and David Joel Trachtenberg, president and CEO officer of Shortwaver Consulting, as principal deputy under secretary of defense for policy.

While Shanahan has never worked for the military, he “understands how to make complex operations mesh,” said Thompson, of the Lexington Institute. His skill in managing Boeing’s global network of suppliers may prove especially useful in helping to lead the Pentagon, which deals with contractors on everything from multibillion-dollar weapons systems to food for troops.

Other defense executives who have made the jump to public service have tended to bend over backward to avoid any appearance of favoritism. “I think given the concerns over optics, they’ll go out of their way to avoid anything with the appearance of impropriety,” aerospace analyst Richard Aboulafia said of Boeing’s relationship with Shanahan in his new role.

(An earlier version of this story was corrected to say the fighter shortfall is with the Navy.)

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE