[Rod]

Breaking news on CNBC quoting WSJ. Will post link as soon as it is up. Nevetheless, this is a huge loss for Boeing.

[BP]

And let the interminable contract protest begin!

[Rod]

I am all for "let the best man win". But....seeing how the European powers use their military budgets to support their defense industries, I wanted a little of "paybac". IIRC the engines for the A-400M transport were supposed to be P&W, as Airbus thought it would cost less, and since the technology was already existent, less risks for the overall projetc. But some Euro powers, wanted an "Euro" engine, (Europrop) and let it be known that they would not order the A-400M with a P&W engine.

[Rod]

Earliest article available:

http://www.bloomberg...6...&refer=home

Northrop Beats Boeing for Tanker Program, Person Says (Update1)

By Tony Capaccio and Edmond Lococo

Feb. 29 (Bloomberg) -- Northrop Grumman Corp., the third- largest U.S. defense contractor, won a U.S. Air Force program valued at as much as $35 billion to build 179 aerial refueling tankers, breaking Boeing Co.'s half-century hold on the business, according to a person familiar with the decision.

Northrop and partner European Aeronautic Defence & Space Co. won an initial contract of $1.5 billion for development and purchase of four test aircraft and options of $10.5 billion to build 64 aircraft, the person said. Boeing was the unanimous pick to win in a Bloomberg News analyst survey this month. The Air Force will announce the contract winner at a press conference at 5 p.m. New York time today.

``For Northrop it's a nice program win, but for EADS it's a major breakthrough in the most important defense market in the world,'' said Richard Aboulafia, an aviation consultant with Teal Group in Fairfax, Virginia, in a Feb. 25 interview.

Northrop rose as much as 4.3 percent to $82 in trading after the close of U.S. markets. Boeing shares fell as much as 4.5 percent to $79.19.

Boeing spokesman Bill Barksdale declined to comment ahead of the Air Force's announcement. A Northrop spokesman said the company had no immediate comment.

To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net ; Tony Capaccio at acapaccio@bloomberg.net .

Last Updated: February 29, 2008 16:35 EST

[PONGO_7409]

"person says"

A real source I think.

[BP]

Contract announcement on a Friday afternoon at 5PM. Ouch. It will be a seppuku weekend over at Boeing.

[BansheeOne]

Well, I didn't see that coming. :blink:

Rod, on Fri 29 Feb 2008 2222, said:

I am all for "let the best man win". But....seeing how the European powers use their military budgets to support their defense industries, I wanted a little of "paybac". IIRC the engines for the A-400M transport were supposed to be P&W, as Airbus thought it would cost less, and since the technology was already existent, less risks for the overall projetc. But some Euro powers, wanted an "Euro" engine, (Europrop) and let it be known that they would not order the A-400M with a P&W engine.

The original engine competition was between Rolls Royce's BR715 and the Snecma/Fiat/MTU M138. The PW180 was considered yet another option. The real political decision was to get all the European manufacturers to design the engine together (with predictable results, i.e. the first airframe is finished but still waiting for the engines <_< ).

As for using military budgets to support one's own defense industry - you mean people actually do this? I'm shocked, shocked I tell you.

This post has been edited by BansheeOne: 29 February 2008 - 1648 PM

[PONGO_7409]

NG wins it

[Lampshade111]

First the whole US101 thing and now this? It seems like the DoD wants to piss off our manufacturers.

[Cookie Monster]

Lampshade111, on Fri 29 Feb 2008 1746, said:

First the whole US101 thing and now this? It seems like the DoD wants to piss off our manufacturers.

I think it is more of the other way around. The DoD is mighty pissed off by huge cost overruns and the "get away" attitude of US defense contractors so they awarded to Northrop Grumman/EADS as a lesson to those that DOD won't be jerked around anymore.

[Chris Werb]

Rod, on Fri 29 Feb 2008 2122, said:

I am all for "let the best man win". But....seeing how the European powers use their military budgets to support their defense industries....I

So the US does not use its military budget to support its defence industries then?

[Chris Werb]

BP, on Fri 29 Feb 2008 2116, said:

And let the interminable contract protest begin!

It doesn't take Criswell to predict there will be much wailing and gnashing of teeth.

[Luke Y]

Cookie Monster, on Sat 1 Mar 2008 0026, said:

I think it is more of the other way around. The DoD is mighty pissed off by huge cost overruns and the "get away" attitude of US defense contractors so they awarded to Northrop Grumman/EADS as a lesson to those that DOD won't be jerked around anymore.

Exactly, its a very clear message that you have to design the best product at the best price (or compromise there of) and while you may have no or few domestic competitors anymore you've got the globalised western world to compete with. Simply being 'murrican won't get you the contract.

[gewing]

Cookie Monster, on Fri 29 Feb 2008 1526, said:

I think it is more of the other way around. The DoD is mighty pissed off by huge cost overruns and the "get away" attitude of US defense contractors so they awarded to Northrop Grumman/EADS as a lesson to those that DOD won't be jerked around anymore.

I wonder if that will be a case of cutting off the nose to spite the face.

[Gunguy]

When we were looking at the airplane issue before, I had said Boeing should have gone with the bigger aircraft. Oh well..... We had many on these boards who thought the smaller Boeing jet was the way to go. So much for that idea. Airbus has a huge, huge win with this contract. Boeing will be should just quit screwing around and buy a 51% share of Eads/airbus and be done with it. We need the A400 anyway. Win-win for all.

[Scott Cunningham]

A little bit of Schadenfreude here. Personally I thought Boeing should have been barred from bidding at all on this contract after all the shenanigans with the KC-767. They had an incredible sense of entitelment, and the competition was theirs to loses.

In any case, the court battles will now begin, and eveything will soon cost 2x as much, all in the name of US jobs.

Remember Eisenhowers warning on the military-indsutrial complex??

[Ivanhoe]

Considering the increasing trend of foreign governments getting into American politics, cash in hand, you can expect all major competitions to be contested in court.

I do remember Eisenhower's saying. It was stupid then, it is stupid now. On page 86 of your Form 1040 instruction booklet, there is a couple of pie charts. Look at the one on the right.

[DB]

BBC is reporting that it will be called the KC-45A

It seems a little unfair to accuse European manufacturers of being responsible for the inevitable round of post-award litigation - this has been happening in the US for years, even if Europeans aren't involved.

[philgollin]

I'm amazed that NG/EADS had the nerve to take on the currency fluctuation risk of such a large sum over such a long period (assuming that the US Government hasn't some sort of limitations in the contract).

The recent decade has seen vast changes in the relative value of the Dollar and Euro (let alone the pound) and there is no way of telling whether that will continue or whether the system will go backwards - maybe they are all priced in the Cinese currency (which I can never remember how to spell).

.

[DougRichards]

US lawmakers blast Boeing defense contract snub
March 1, 2008 - 8:29PM


US lawmakers reacted angrily to the award of a 35-billion-dollar Defense Department contract to a Northrop Grumman/EADS team, a major coup for Europe's Airbus at the expense of US giant Boeing.

Reacting to Friday's decision by the US Defense Department to award the contract for a fleet of in-flight refuelling aircraft, Republican Senator Sam Brownback said he was "shocked at this decision and very disappointed.

"I'll be calling upon the Secretary of Defense for a full debriefing and expect there will be a protest of the award by Boeing," Brownback added.

"It's stunning to me that we would outsource the production of these airplanes to Europe instead of building them in America."

Republican Representative Todd Tiahrt said he was "deeply troubled."

He added: "We should have an American tanker built by an American company with American workers," he said.

"I cannot believe we would create French jobs in place of Kansas jobs."

According to the Boeing website, the company is the largest employer in Kansas.

But a senator from Alabama, where some of the work will be done, welcomed the decision.

"Not only is this the right decision for our military, but it is great news for Alabama," said Richard Shelby, a Republican.

The contract was expected to bring up to 1,800 jobs to the Mobile area and 5,000 to the state, he added.

Airbus will assemble the tankers in Mobile, Alabama, and had said that if it won the contract it would transfer assembly of its commercial 330 aircraft there, creating jobs.

Los Angeles-based Northrop Grumman and the European Aeronautic Defense and Space Company (EADS), parent of Airbus, will provide up to 179 tankers for the US Air Force.

The Boeing Company, the second leading US defense contractor after Lockheed Martin, had been considered the heavy favorite.

The contract for the newly named tanker, the KC-45, is one of the largest Pentagon contracts in recent years and the first order on a tanker market valued at more than 100 billion US dollars in more than 30 years.

It marked an unprecedented triumph for EADS, which has achieved a foothold in the world's largest defense market after a history of minor contracts.

"The tanker is the number-one procurement priority for us right now. It is the first step in our critical commitment to recapitalize our aging fleet to move, supply, and position assets anywhere," General Duncan McNab, US Air Force chief of staff, said in a statement.

The Northrop Grumman/EADS team "clearly provided the best value for the government," said Sue Payton, assistant secretary for air force procurement.

Ronald Sugar, chairman and chief executive of Northrop Grumman said: "Northrop Grumman's vast expertise in aerospace design, development and systems integration will ensure our nation's warfighters receive the most capable and versatile tanker ever built."

The competition had been closely watched because of the size of the contract and the political implications of a choice between an all-American contractor or a mainly US team that includes a foreign contractor.

In Paris, EADS CEO Louis Gallois told AFP the contract was a "great subject of pride" for the company and would "encourage it to pursue its strategy in the United States."

Price had not been the deciding factor in the mater, said Gallois, as the choice had been made on "the qualities of the plane."

Boeing expressed its strong disappointment and said it would ask the air force for an explanation.

"Once we have reviewed the details behind the award, we will make a decision concerning our possible options," said Boeing spokesman William Barksdale, hinting at a possible protest.

Boeing and the EADS-Northrop team had been competing for more than a year for the prize, which offers a cushion for decades in case of a downturn in the highly cyclical market for commercial aircraft.

Richard Aboulafia, an analyst at Teal Group Corporation, said the contract was a "major boost" for EADS.

"This is, by far, the biggest US defense contract ever obtained by a continental European company," Aboulafia said.

EADS's winning offer is a modified version of the Airbus 330. The commercial plane will be militarized by Northrop Grumman and its American partners to prevent the transfer of sensitive technology to a foreign entity.

Boeing proposed a version of its long-haul cargo plane, the 767-200.

In May 2003, a similar tanker contract was awarded to Boeing, but it was annuled under allegations of procurement fraud, for which Boeing paid a record 615-million-dollar settlement to the government. (My emphasis)

© 2008 AFP

This story is sourced direct from an overseas news agency as an additional service to readers. Spelling follows North American usage, along with foreign currency and measurement units.