Bitter loss for Boeing: Pentagon picks Airbus

In a shocking upset Friday, Boeing lost the long-awaited and lucrative Air Force refueling-tanker contract to a competing bid based on an Airbus plane.

The Pentagon chose Northrop Grumman, partnered with Airbus parent EADS, to build the next generation of Air Force tankers, a contract worth an estimated $40 billion.

Boeing’s loss means the 767 assembly line in Everett will wind to a close around 2012 when the current commercial orders run out. No layoffs are likely, though, as the roughly 600 production workers plus supporting engineers will transfer to other programs, including the 787 Dreamliner.

But Washington state has lost out on the chance to add as many as 2,000 jobs locally at Boeing ”” and perhaps more than 6,000 new jobs overall.

Instead, those jobs will go to Europe and Alabama.

Large sections of the Northrop/EADS tanker will be built in Europe; they will be shipped across the Atlantic for assembly at a new widebody-jet plant to be built in Mobile, Ala., which will gain some 1,500 direct jobs.

Read it all.


Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, America/U.S.A., Economy, Europe, Globalization

18 comments on “Bitter loss for Boeing: Pentagon picks Airbus

  1. carl says:

    There is of course the little matter of getting Congress to agree. This is a looooooong way from over. But it is shocking that the US would even consider giving such an important contract to an avowed US enemy.


  2. Tom Roberts says:

    Carl- so Northrop-Grumman is an “avowed US enemy”? Who would’a thunk it?

  3. Cennydd says:

    The Air Force will be acquiring a larger and more capable tanker/transport, while at the same time helping to provide employment to Americans who need it; at the same time breaking Boeing’s monopoly of the arospace defense industry…..which has been steadily growing. Boeing’s employees are involved in the manufacture of the 787 Dreamliner and the company’s other aerospace programs, and it looks like that will continue.

  4. Tom Roberts says:

    Pretty good article all around, which should be expected of Boeing’s “home town” paper. (Ignoring the fact that the corporate HQ is now in Chicago)
    I love the rumor and innuendo end of it as well:
    [blockquote] Richard Aboulafia, an industry analyst with the Teal Group, said the win validates EADS’ steady push to gain entry into the U.S. defense market. That campaign included hiring numerous retired Air Force and other military leaders as consultants.

    “All those Christmas parties they paid for. That big Washington office,” Aboulafia said. “Really, really worth it.” [/blockquote]
    Reminds one of Cicero’s
    Nervos belli, pecuniam. = Money, the sinews of war.

    Contrary to carl I think that this award is a good thing for both the taxpayer and USAF. Prior to this competition there was a decided lack of competition in this market. Simply speaking, the US companies had divvied up the contracts between themselves, and Boeing looked like it was going to do tankers forever. Same thing happens in space contracts where LM doesn’t do comm sats and Boeing doesn’t do intell/reconnaissance sats. Now there will be competition, unless USAF manages to encourage further industry consolidation. The comments of the local Mobile AL fellow were self congratulatory, but for the national audience, rather apt.

  5. BCP28 says:

    Although Northrop was involved, it does surprise me that the Pentagon went with the option that nets fewer jobs for Americans. (My protectionist/New Deal mentality is coming out.)


  6. Tom Roberts says:

    BCP28- DoD criteria for source selections usually don’t involve US employment criteria. One could make the point that with a European partner, the chances are excellent that European nations would also use the NG-EADS tanker as a (non competitive) standard, thereby putting even more US jobs into this award’s positive balance, while a Boeing design would have stiff competition for the European market.
    Now, what Congress might think about that subject is another matter, as carl might point out. But notionally, USAF is simply supposed to buy the best tanker for the money, not run a jobs creation program.

  7. carl says:

    Just for the record, I don’t doubt the Air Force made a good decision. I was in the Air Force and trust my former service. But if you don’t understand the the political ramifications of this decision, you are simply naive. And if you really think France is an ally of the US you are seven times naive. I would no more give this kind of business to France then I would to Red China.

    Call me ‘No friend of Boeing’ but even less a friend of France.


  8. Cennydd says:

    Remember, too, that Italy, Spain and Germany are also involved in EADS, and they benefit as well. I agree that European orders for this plane…..including the RAF…..could mean a substantial order for American workers to fill, and that means more jobs….maybe not in Seattle…..but jobs just the same.

  9. BCP28 says:

    I think, from a national security perspective, that there is a serious question here of what is best for the military and the US. I don’t consider France some kind of enemy, but the government there does look after its own, and while the current leader may be more in line with US policy than DeGaul, Mitterand, or Chirac, there is no reason to think that may not change at some point.

    Ditto for the rest of the EU.

  10. Payton says:

    Whether you care for one corporation or another, please remember there are real people involved here. Some (in Mobile) will be affected positively, and some (Seattle, Wichita, etc.) negatively. This one impacts me personally. I assume the competition was fair, and though I don’t believe the right choice was made and I find funneling my tax money to France very distasteful, we will get over it. But please don’t dis American workers just because you don’t like their employer (for whatever reason).

  11. vu82 says:

    Open admission: I live in Mobile and thus have a (very) indirect interest in the outcome of this decision- that of my hometown.

    Nevertheless just FYI and from one who has followed the specifics: This is a courageous and remarkable decision by the Air Force. They have chosen the clearly better plane in the face of political conventional wisdom. Boeing chose to offer an inferior design based on a commercially defunct airplane to keep the 767 assembly line going. They have all of the “history” and theoretical political muscle on their side- and by conventional wisdom should have “won.” I am frankly pleasantly surprised at the decision- which goes against all I would expect in a US Government purchasing decision. The Northrup/ EADS plane is by all measures a superior buy for the Air Force- in capability and value. For once the interests of the taxpayer and military efficiency have come out ahead.

    The Northrup/EADS tanker is already flying and has been chosen by the RAF, the Saudis and several other important US allies. The Boeing offering only got its flight certificates this month. As the article states the Boeing employees will just be transferred to viable operations.

    I don’t think this will immediately change my view of the Federal Government as a giant boondoggle but it does restore my faith a bit.

  12. vu82 says:

    Also I understand the theoretical “national security implications” argument but find that they are an insufficient reason to choose a dog of a tanker. I would agree that the we would all be best served by a truly competitive “all American” market for arms procurement on this scale but it does not presently exist.

    Boeing is in the midst of an effort to reform its business models and its past history of questionable procurement practices and I wish them well in the future…. They have done generally well of late apart from this example.

  13. carl says:

    Two quotes by the Commander of AMC indicate the thrust of the political argument in favor of this decision. Take them in sequence.

    [blockquote] Gen. Arthur Lichte, head of the Air Mobility Command, insisted at the news conference that “this is an American tanker. Flown by American airmen.” “It’ll have a great big American flag on the tail,” he said. [/blockquote]
    This is politely termed ‘spin.’ The aircraft is primarily a French aircraft. The article even admits the plane will be designed and largely built in Europe. [b]Northrup Grumman is on the team for one reason only – to front the proposal to the Pentagon and to Congress[/b]. They provide experience and contacts, and an American face. If Airbus tried to make this proposal on its own, it would be dead on arrival. They would have no prayer of success.
    [blockquote] Boeing may appeal the tanker decision, but at the news conference Lichte asked that the loser not do “anything that would slow down the war fighter.” “We need to get on with this,” he said. [/blockquote]
    This argument is not really directed at Boeing, but at Boeing’s congressional supporters. “Don’t hurt the warfighter.” But it won’t happen. This decision will be fought tooth and claw. There are very powerful people in Congress who will bend the axis of the Earth to change this decision.

    I suspect the USAF wanted to thwack an arrogant monopoly supplier (i.e. Boeing) on the nose. The military gets really frustrated with contractors in areas where the economics just don’t warrant two American suppliers. They probably want to induce competition, and bring Boeing to heel. But building up a competitive industry in France is an awfully high price to pay. A great deal of this technology crosses over into the civilian world. We will be paying Airbus to develop civilian aircraft to compete with our own industry. There will be some assembly in the US, but the high value work will be performed in Europe. It should also be noted that [u]the only reason[/u] there is any assembly in the US is to answer the objection that Congress should not send so much money to employ foreigners. The idea that employment impact doesn’t play a part in this decision is naive.
    Finally, did you also see this?
    [blockquote] Paul Meyer, Northrop’s vice president of Air Mobility Systems, said his team also offered “a very aggressive price, because we wanted to be in this market.”[/blockquote]
    Aggressive pricing, or did they low-ball? Where did they find the savings? Where those savings from the European part of the team or the NG part? And were they able to low-ball the price because of European Govt subsidies to Airbus? I won’t be the only one asking that question.


  14. vu82 says:

    Well I guess I should let Carl have the last word but I’ll just pleasantly agree to disagree and repeat my assertion above that the core of the matter is that “the better plane won.”


  15. Irenaeus says:

    Commenters who object to the choice of a European supplier should remember that aircraft are a major U.S. export. If we want others to buy our excellent aircraft—rather than hide behind a screen of protectionism and vague rumblings about national security—we need to do the same ourselves. The measure you give is the measure you get.

  16. Cennydd says:

    We need to remember that Boeing’s commercial aircraft include entire major assemblies supplied by foreign manufacturers, with landing gear in one country, and entire fuselage components in another, etc. Is there any difference between them and the proposed Northrop EADS KC-45? No. The only difference is that they are airliners/freighters and the KC-45 is a tanker/freighter capable of carrying passengers on a larger scale than the KC-135 and KC-10 Extender currently in use. The main thing is that Boeing is finally losing their monopoly of the American market.

  17. carl says:

    [#15] Irenaeus

    But we aren’t talking about commercial airliners for Delta Airlines. We are talking about a critical resource in the United States Military being beholden to a foreign power that has proven itself willing to act decisively against American interests. I have not forgotten how France behaved in 2002-2003, and do not think such a salient fact should be ignored in this instance.

    The military of any country is its final guarantor of sovereignty. The critical warfighting capabilities of our military should therefore be indigenous.


  18. Marion R. says:

    Either the acquisition team made its decision on purely professional, prudent, economic principles or not. If the decision was made for the purposes of ‘sticking it’ to an overly cozy U.S. defense industry, then the decision was made for other than purposes of economic prudence. In other words, for political reasons. Once one admits the decision might have been made for political reasons, then once must entertain reasons beyond merely ‘sticking it’ to the U.S. defense industry. It ispossible, for example, that the contract made have been awarded to French interests for geopolitical purposes. That is, to secure their cooperation regarding other vital U.S. interests that are remote from the specifics of this contract. It is furthermore likely that that cooperation, in the long run, is of incalculably greater strategic importance. Excepting, of course, the true and sad fact that job opportunities will be lost, it is otherwise a bit silly to Monday-morning-quarterback the whole thing.