Internal dissent rattles leading defense trade group


In an email sent in February to AIA chief operating officer Peter Prowitt, representatives of the three companies wrote that they were not receiving an adequate return on investment from the trade association to address issues at industry-wide, and instead relied on other groups such as the National Defense Industrial Association and Professional Services Council to better represent their interests.

“We have turned to other organizations (PSC, NDIA) who anticipate our needs, immediately respond to our calls for help, and take action on our collective behalf,” the representatives wrote.

POLITICO also interviewed three industry officials, who were granted anonymity because they were not authorized to speak officially, who confirmed that some members are withholding dues. They claim Fanning failed to effectively raise his concerns on behalf of the industry with members of Congress and the administration.

People said over the past year they’ve needed the AIA to be their advocate as Congress weighs Covid protections for contractors, the Biden administration pursues vaccination mandates and the Pentagon was increasing scrutiny of defense mergers.

“We don’t feel our dues are well spent. I don’t want to spend our money to get more work,” said one of the industry officials.

Fanning declined to comment for this story. A spokesperson for AIA said in a statement: “AIA has a strong track record of delivering on the priorities of our industry’s CEOs who define our strategy. With a diverse membership of more than 300 companies, debates between our companies are a regular part of our work.Our mission is to build consensus and bring the industry together, which means we listen to every point of view and every concern.

“Whether it’s a business or a handful of members, we are committed to answering and resolving their questions or concerns when they arise,” the spokesperson continued. “And we do it quickly and efficiently to support our industry.”

POLITICO sent AIA a detailed list of specific member complaints about Fanning’s leadership. The AIA spokesperson declined to comment beyond the statement.

Spokespersons for Boeing, Lockheed and BAE declined to comment.

A force in Washington

Fanning represents nearly 350 companies in his role as CEO and Chairman of the largest aerospace and defense trade group in Washington, D.C. He joined the AIA in 2018, after serving as Secretary of the Army in the Obama administration, going down in history as the first openly gay serving secretary, and held high-ranking positions in the Air Force, Navy, and DoD personnel.

“One would have thought that, given Fanning’s credentials, he would have made more headway in persuading the Biden administration of industry positions,” said Loren Thompson, defense analyst and consultant at the Lexington Institute. The Lexington Institute receives contributions from Lockheed Martin, Northrop Grumman, Boeing, and other defense contractors.

Thompson called Fanning “charismatic and very astute politically” with the best resume an AIA leader has ever had. “However, Fanning is fundamentally a technocrat whereas the regulators in the new administration tend to be more ideologues than technocrats.”

Withheld dues, which one industry official says total up to $2 million, make up a significant portion of the organization’s revenue. For example, the association brought in $22 million, according to its 2019 990 tax form, the most recent publicly available. Dues per company range from $7,600 to nearly $450,000 and are paid on a sliding scale based on a member’s recent US aerospace sales. The AIA spokesperson did not respond when POLITICO asked if dues withheld could lead to members possibly being expelled.

The AIA works with Congress, the White House, and other industry organizations to advocate for its members on issues important to the aerospace and defense industry.

The group does this by presenting congressional testimony, white papers, policy papers, and hosting events for the House and Senate aerospace caucuses. The AIA also coordinates visits by Congressional delegations to international air shows.

Politically, members say they are frustrated with what they see as the AIA’s lack of response to President Joe Biden’s September executive order requiring federal contractors to get vaccinated against Covid-19. They note that for large companies, even a small percentage of unvaccinated employees can mean they are missing thousands of workers.

“When you look at the work of these people, we can’t afford to lose them” because it requires specialized skills, said one of the industry representatives. The person cited difficulties finding welders certified to work on naval vessels.

Last fall, members suggested Fanning write a letter to the Biden administration explaining how the mandate could hurt the aerospace and defense industry, according to an October email.

“Eric didn’t do anything before the facts,” the industry executive said. “We were asking for his engagement and he didn’t want to do anything. Even when he claimed to do something, he didn’t.

A spokesperson for the NDIA confirmed that the organization participated in calls with the executive and exchanged information. A representative for PSC did not respond to a request for comment.

Tipping point on defense mergers

Another perceived missed target for aerospace and defense companies was a failure to convince Congress to grant an extension to Section 3610 of the Coronavirus Aid, Relief, and Economic Security Act, which allows federal contractors to be reimbursed if they cannot work on site due to Covid-19. The protection expired on September 30.

Members reached a tipping point on February 15, when the Pentagon released a report saying it planned to take a closer look at defense mergers. The AIA has not released a statement on behalf of its members, two of the industry officials noted.

“It’s reactionary and just not good enough,” an AIA member emailed COO Prowitt.

Another trade group, NDIA, however, responded. “NDIA believes competition is at the heart of delivering the best ideas, capabilities and value to our fighters. We also know that the key to increasing competition is a vibrant defense industrial base sector, where businesses can thrive and which attracts new entrants,” an NDIA spokesperson said at the time.

As POLITICO previously reported, members were also alarmed when Fanning — on a personal note — endorsed Pete Buttigieg in 2019 and later Biden as the Democratic presidential nominee in an LGBTQ-focused endorsement during the month of pride in June 2020.

The endorsements have infuriated members who expect the trade group’s CEO to stay out of partisan politics while running the association. The member CEOs weren’t even told he was going to do the approvals; one said “there is no personal capacity” when you are at the head of a large professional association.

“It could have been a dismissal offense,” said one of the industry officials.

Despite his critics, Fanning, whose 2019 salary was $1.2 million, still has the support of some of his members and former government officials who say he is good at engaging publicly on behalf of industry.

Ellen Lord, who was the Pentagon’s top procurement official in the Trump administration, said that during her tenure, Fanning worked closely on issues involving multiple organizations and companies.

This required Fanning to be good at “listening, processing and being constructive without displaying emotion and I have always observed that CEOs have interacted well with him in all transactions in which I have been involved professionally”.

“Eric is hugely respected both in the Pentagon and on the Hill, so I find it extremely unfortunate that this type of disagreement is aired publicly as I don’t think it helps either the industry or the AIA,” she added. . “I find that disappointing.”

Not all comments were negative: Spirit Aerosystems CEO Tom Gentile, vice president of the AIA, on Thursday hailed Fanning’s involvement in forming the Aviation Manufacturing Jobs Protection program that provided $673 million to 593 companies in the aviation supply chain, as the industry faced a severe drop in air travel linked to the Covid pandemic.

While Fanning faces a revolt from some of his members, industry officials acknowledge that he is plugged into Washington power centers and that his notoriety has been a useful asset to the AIA.

“He brings a deep understanding and a set of high-level relationships that have been helpful to the organization,” added a fourth senior industry official, who was granted anonymity because he was not authorized. to speak publicly. “He can engage at the highest levels of government because he is a known and effective figure who has been in this space for a long time, particularly in the Pentagon and in all agencies, where he has been able to gain access to raise issues. Of the industry.”

The AIA has a Board of Directors that meets twice a year and an Executive Committee that meets quarterly and is made up of 22 leaders from major members, including Boeing, Lockheed and BAE, the companies that withhold dues.

At the executive committee meeting late last year, members discussed concerns over Fanning’s handling of the vaccine mandate and also discussed how that mandate affected the industry, according to a person familiar. with the meeting.

Fanning’s contract does not expire until the end of the year, but it can be terminated for cause, an industry official said.


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