Hello and welcome to the Global Dialogue. I'm Shireen Bhan. It has been a tumultuous last few years for Boeing. It is now trying to script a turnaround plan. It has priorities in place to try and cut costs, infuse more capital, and put a more quality-focused approach on the table. Of course, India continues to be an exciting market for the company. It hopes to start to deliver on some of the orders that Air India and others have placed with the company. To talk to us about where things stand for Boeing and more importantly the opportunities that the Indian market throws up, Dr. Brendan Nelson, many thanks for joining us here on CNBC-TV18. It's an absolute pleasure to have you back on the program. But let's get started there. Before I talk to you specifically about India, let's talk about what's happening with Boeing globally. You've got a new CEO in charge, you've managed to put a new contract with the workers' union in place, you've got a quality assurance plan that's been submitted to regulators. How confident do you feel about 2025 and your ability to be able to script a turnaround from here?
Well, good evening, Shireen. You've given a terrific summary of where we're at and where we're going. We are quietly confident in everything that we have done since the incident with the 737 Alaska in January last year. We've slowed down our production rate on 737 considerably. We've put in key performance indicators which measure the performance of that production line. We had stand-downs of 70,000 of our employees across our manufacturing sites. We solicited 35,000 ideas for improving the quality of our production. We've implemented 75% of those already. We have also introduced random auditing, substantially increased the training of our workforce, simplified instructions in the production line, and amongst a number of other initiatives, including reintegrating Spirit AeroSystems structures into the Boeing business. A substantial reduction in quality faults coming from Spirit and our other suppliers, so much so that our customers, who ultimately make these judgments, are speaking very favorably about the quality of the planes that they are receiving this year. And this year, January and February, we've had 89 deliveries in those two months. And we're quietly confident that we have the right plan and have put in place the right measures with key performance indicators to satisfy the FAA and certainly to satisfy our customers and give confidence to the flying public.
Well, you know, winning back confidence, winning back trust is going to be an arduous task and it's not going to be something that you can do in the matter of a couple of months. But let's talk about the order delivery as well as the order backlog. You do of course have constraints and restrictions that have been imposed by the FAA. You're capped at about 38 aircraft at this point in time as far as the 737 is concerned. But outside of that, you now have a new element to deal with, which is the tariff war and the trade war escalation between the US and different countries at this point in time. How does that impact an already stretched supply chain?
Well, the Boeing company has a proud 109-year history, an 80-year history partnering with India. We have not only survived but we have prospered and grown through wars, through all sorts of economic turmoil and challenges over those many decades. The introduction of tariffs by the United States by the new administration and the responses to those tariffs by other countries and markets throughout the world, of course, it represents a challenge to us. It will obviously have a cash impact on us. We believe that we can manage this. We're also having a very close look not just at our tier one suppliers but our secondary and tertiary suppliers. We want to make sure that we don't have a loss of continuity in our supply chain with some of the sub-tier suppliers that we don't have direct visibility of. And then of course the other impact is the response of countries, Canada, of Europe, of Mexico and a number of other countries. How will they respond in terms of their disposition to American exporters? But we're confident that we can deal with this and we're confident that we will continue to grow and safely, with very high quality, increase the production rate and delivery of our aircraft across all platforms.
You talked about the cash impact as far as the tariffs are concerned. Is there an estimate at this point in time on what it could cost the business?
Well, I'm not going to publicize the figures that we've put together based on the tariffs that have been implemented and what President Trump's administration has foreshadowed. It's not insignificant, but it is something that we believe that we can manage. And our CEO Kelly Ortberg made the observation that he's lived and worked and run a business in a tariff environment before. We respect the decisions that are made by the United States government as we do the policies and responses of governments throughout the world, but believe that we can work through this. Aviation is 4% of global GDP. It is absolutely essential that people throughout the world are able to travel to see their families and friends, to conduct business, to enable commerce, and of course for countries to, if you like, exchange their cultures through aerospace. So President Trump has made it clear that his ambition is to make America great again, and it's obvious that Boeing is a great, proudly American company with a global footprint, a globalized company. Now, we need to make sure that the policies of the administration support us and aerospace. And I believe we'll be okay.
So let me ask you about the Make in America and Make America Great Again plan and how that fits into your strategy as far as India is concerned. You've got a fairly large supply base here in India, about 320 suppliers currently. Your annual sourcing is at about 10,000 crores today. How does India fit into this Make America Great Again plan from a Boeing perspective?
Well, generally speaking for Boeing, 79% of our backlog, our commercial orders for planes, come from outside the United States. 29% of our defense orders from outside the United States. Increasing and strengthening Boeing's presence in India strengthens Boeing in the United States. When we invest in countries outside the US, when we increase our sales into those markets, we are feeding American families, American mortgages, and American pensions. It's critically important for us, the relationship that we have with India. 30% of our non-US workforce, around 7,000 people, are here in India. We have advanced manufacturing, we have a supply and distribution center, we've invested in MRO support for that, a major engineering center in Bangalore employing around 6,000 people on two campuses. And it's extraordinarily important that we support the development of India's aerospace sector. And President Trump and Prime Minister Modi have foreshadowed a fair trade agreement between India and the United States, and we very much think that what we do is a foundation for it and something that we hope we can build upon in that fair trade agreement. And the other thing of course is the defense platforms that we have provided to India that we support in India for India.
I'll come to defense in just a second, but you brought up the trade deal that both sides are negotiating at this point in time. And both sides have expressed an ambition to do a great trade deal where everything is on the table. From Boeing's perspective, what is it that you would like to see both sides take forward so that you could see an amplification of the relationship specifically as far as aviation is concerned, both on the defense as well as the civil side?
Well, certainly India, and look, I should say that what Prime Minister Modi has done over more than a decade in transforming India, in reforms in finance, in investments in infrastructure, the energy transition, and many other reforms, have created a country which is now certainly an emergent, close to a superpower, something that we find very exciting and appealing in terms of investment. The Indian government has already responded to some concerns that we had put about making it easier for the aircraft lessor market to develop in India, reducing tariffs for example on components that come in to support the MROs that support and maintain military and commercial aircraft in India. And we're also working with the Indian government in making sure that the increasing number of airports, the secondary and regional airports that are so important, are fully integrated into the aerospace sector with the primary airports, that that is able to work effectively. And of course the investment in training. So all of those things, and the advanced manufacturing that we do in our joint venture with Tata in Hyderabad, those and other things are basis for further driving aerospace in the fair trade agreement. Because in the end, at the moment, India, Akasa, Air India, they have ordered 446 Boeing commercial airplanes and we are working hard to make those planes and to deliver them. Now in terms of a trade deficit or arrangement between the United States and India, that's going to take a big bite out of it. And we want to do a lot more in supporting India and will be standing ready to be a positive part of that fair trade agreement.
So when you talk about wanting to do more, and especially given the additional challenges that we're seeing as far as the global supply chain is concerned, would it be fair to assume that we could see sourcing from India be enhanced from the current levels?
Well, at the moment we have 325 suppliers in India, and by the way, they are world-class, world-class, reliable, very high quality. We invest about $1.25 billion US in those suppliers. And of course the planes are made in the United States in support of American jobs and families as I said earlier. In terms of further growing the supply chain in India, we don't know yet whether we are going to do that. It will be determined by the number of planes that we have to build and what we can source and supply in the United States, of course, and then if not, what might be further done in India. We're systematically doing everything we can to grow our presence in India, to support India for Indians, to the benefit of both India and the United States.
So what is the aspiration then as far as the joint venture for instance with the Tatas are concerned? Do you foresee more joint ventures or an enhancement of the agreement that you have for instance with the Tatas?
Well, our CEO Kelly Ortberg and I came to India in late January, and apart from a very good meeting with Prime Minister Modi of course, and then the Finance Minister, we spent some time at our joint venture with Tata in Hyderabad. And it's absolutely stunning to see full-size vertical fin assembly and precision machining being done by Indians in India, producing vertical fins for 737 and other high-precision components for commercial aircraft, 300 Apache helicopter airframes now built, and some of the interior components for F-18s and a number of other things. The joint venture there, we've been looking at what further statements of work that we could do, very high-end manufacturing statements of work on some of our products that we are developing in the United States. And whether we go further into that will be something that we would certainly discuss not just with India but also with the US government. We want to make sure we get this right in the interest of the United States and in the interest of India.
Well, speaking of interests of your Indian customers, and you addressed the issue of the backlog, what is the current backlog? It's about what, 5,000 plus?
5,500 aircraft. 5,500. So in terms of, you started off by quite accurately summarizing the problems that we've had, and we have eroded trust over these past few years. We've eroded trust, trust from our customers, and we're working very, very hard now to make absolutely sure we have precision engineering, the highest quality production, that we are absolutely confident of every aircraft that comes off that production line. And so we slowed the production rate, we slowed it down to make sure we get it right. So our ambition is to make the highest quality planes, the most efficient, flexible, lowest maintenance, highest availability performing planes that is possible, and to do so at pace to make sure we can get those planes to Air India and Akasa and other Indian customers that we have. So the biggest, in terms of confidence in the Boeing Company, you just have to look at it. Look at the demand for our products, for our commercial products, for our defense products. Look at the demand for the support services and parts and sustainment and everything that we do in our services and logistics business. Then look at the technology that we are developing. We're at the leading edge of the development of technology in a whole range of areas in artificial intelligence, autonomy, and advanced materials. The kind of investments, by the way, we're looking to do in India to increase manufacturing capability in India. And then look at the people. And in India, your engineers are amongst the smartest in the world. And in one of my visits here in Bangalore, I was sitting in a room with 40 of our engineers, and after an hour of asking them questions and then them asking me questions, I said, as a matter of interest, is anyone here got a PhD? About a quarter of them put their hands up, and then one fellow said, I've got two. And so very high-quality work in whether it's in AI, robotics, the Internet of Things, advanced research and technology, digital, very high-quality work. And what India and Indian engineers do complements and supports our growth in the United States. It's a win-win.
You know, speaking of this win-win, how much of the cutting-edge development is actually going on at your engineering centers here in India? You talked about the 7,000 people that you have and the high-quality engineers that you have working for you in India. But in terms of, you know, development value and what's the sort of input that India is providing, what's being made in India for the world, especially on the development side?
I know what you're alluding to. Indians have a well-earned reputation for being absolutely world-class in software engineering. Yes, we've got some software engineering being done, but as our CEO Kelly Ortberg, who's an engineer himself, said when he was shown some demonstrations at our Boeing India Engineering and Technology Center, which Prime Minister Modi opened in January last year, when he was showing these things, he went, 'Wow, I had no idea we were doing this here.' So I won't be specific because some of these things are quite sensitive, but it's world-class, and we wish to do more of that. And in doing it in India, that helps us grow our engineering workforce and our engineering capability in the United States. But we are a global company and we're not retreating from the world.
