By David Shepardson
WASHINGTON (Reuters) – Boeing Co is in talks with the U.S. Defense Department about how the planemaker’s planned guilty plea will affect its wide-ranging government contracts, a person familiar with the matter said.
Boeing Co. has agreed to plead guilty to a charge of criminal fraud conspiracy to resolve an investigation into two deadly crashes of its 737 Max aircraft, the U.S. Justice Department said late Sunday in a court filing.
Boeing and the Defense Department did not immediately comment Monday.
Boeing shares rose 3.4% Monday to $190.68 in morning trading.
A guilty plea could threaten the company’s ability to secure lucrative government contracts with entities such as the U.S. Department of Defense and NASA.
Boeing’s defense and space unit is vital to its business, with first-quarter sales of $7 billion, up 6 percent from a year ago. Boeing said in its annual report that U.S. government contracts accounted for 37 percent of its revenue last year, including foreign military sales.
However, the financial costs associated with pleading guilty appear “relatively reasonable given the size of the company and its overall liabilities,” said Ben Tsouknos, director of airlines at S&P Global Ratings.
“We expect Boeing to likely continue to be a major supplier of defense and aerospace products following its guilty plea,” he added.
As part of the plea deal, Boeing will pay a criminal fine of $243.6 million. Boeing also agreed to invest at least $455 million over the next three years to strengthen its safety and compliance programs, appoint a third-party monitor to oversee the company’s compliance, and submit annual reports to the Justice Department.
Boeing bond prices were little changed in morning trading in New York on Monday, according to data from the London Stock Exchange.
Bankers said Wall Street’s appetite for financing Boeing could deteriorate if the guilty plea materially affects its business — by not winning big contracts, for example.
