Boeing Just Won a Multibillion-Dollar Contract. Here's Why That's Bad News.
More than a dozen years ago, (NYSE: BA) made a bad bet -- and it's getting worse with age.
In 2011, desperate to win contracts for a defense business that was suffering flat revenues and declining profits, and threatened by rival defense contractors trying to horn in on its aerial refueling tanker business, Boeing bid low on a contract to build new "KC-X" refueling tankers for the U.S. Air Force. For just $31.5 billion ($176 million per plane), Boeing promised to build the Air Force a fleet of 179 new tankers -- a full 10% below the bid made by rival Airbus. And Boeing won the contract.
At the time, I wrote an article warning that this might be a Pyrrhic victory for Boeing. Yes, it had won the contract, and all the revenues that came with it. But in doing so, as I noted, "Boeing also cut its profit margin to the bone."
Source Fool.com
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