The Vultures on Board
Northrop-Grumman
Sightings from The Catbird Seat
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March 1, 2008
Airbus parent beats Boeing for
big U.S. Air Force contract
By Leslie Wayne, International Herald Tribune
WASHINGTON: The U.S. Air Force, in a stunning decision against Boeing, awarded a $40 billion contract for aerial refueling tankers Friday to a partnership between Northrop Grumman and the European parent of Airbus, putting a critical military contract partly into the hands of a foreign company.
The contract, one of the largest at the Pentagon, has the potential to grow to $100 billion. It is also a sign of the growing influence of foreign suppliers within the Pentagon and breaks a decades-long relationship with Boeing, which built the bulk of the existing tanker fleet and fought hard to land the new contract.
"This isn't an upset," said Loren Thompson, a military analyst at the Lexington Institute, a Washington-area research group. "It's an earthquake."
Under the contract, Northrop and the parent of Airbus, European Aeronautic Defense & Space, or EADS, would build a fleet of 179 planes, based on the existing Airbus 330, to provide in-air refueling to military aircraft, from fighter jets to cargo planes. It gives a huge lift to EADS, whose commercial aviation program has suffered a number of setbacks in recent years.
While final assembly of the craft would take place at an Airbus plant near Mobile, Alabama, parts would come from suppliers across the globe.
At a news conference, air force officials said the creation of domestic jobs was not a factor in the decision. In response to questions about possible negative reaction to the deal in Congress, General Arthur Lichte, head of the air force's air mobility command, said, "This will be an American tanker, flown by American airmen with an American flag on its tail and, every day, it will be saving American lives."
Reaction from some in Congress, however, was swift.
"We are outraged that this decision taps European Airbus and its foreign workers to provide a tanker to our American military," the delegation from Washington State said in a joint statement. Boeing planes are assembled outside Seattle. "This is a blow to the American aerospace industry, American workers and America's men and women in uniform."
For its part, Boeing, which had been considered the strong favorite to retain the contract, said it was "very disappointed" in the outcome. But it did not say whether it would file a formal protest - something General Michael Moseley, chief of staff of the air force, has said he hopes the losing bidder will not do because it would only further delay the tanker replacement program.
In its statement, Boeing said, "We believe that we offered the air force the best value and lowest risk tanker for its mission." The company added that only after a debriefing by the Pentagon would the company "make a decision concerning our possible options, keeping in mind at all times the impact to the warfighter and the nation."
A Boeing victory was considered so certain that many Wall Street analysts had already factored the contract into their economic forecasts for the company and led one senator, Kay Bailey Hutchison, Republican of Texas, to prematurely send out a press release praising Boeing for its victory.
The air force decision is also a surprise ending to a protracted contracting process that went on for nearly a decade and became mired in scandal and international politics. Senator John McCain, the presumptive Republican presidential candidate, had scuttled an earlier attempt by the air force to award the contract to Boeing, opening the door for the Northrop-Airbus bid.
McCain's campaign spokeswoman referred calls to his Senate office, which could not be reached for comment.
Norm Dicks, a Washington Democrat who is a member of the House Appropriations Committee Defense Subcommittee, said he was attending an anticipated victory party at Boeing's Washington headquarters when the mood suddenly darkened.
"Here we are in the middle of a recession and we give this to Airbus?" Dicks added. "That is not going to go down well."
Ronald Sugar, the chief executive of Northrop Grumman, said in a telephone interview that he expected members of Congress would have a "variety of views" depending on whether their districts would be gaining or losing jobs under the deal.
He said that 60 percent of the content of the new tanker would come from the United States and that the contract would create 2,000 jobs in Mobile and 25,000 overall in the United States.
"This is more about the capability that we will give to the kids fighting the wars and the cost to the taxpayer," he said.
Backing Sugar's view was Senator Richard Shelby, Republican of Alabama, who hailed the decision as "great news for Alabama."
The Alabama and Mississippi delegations had lobbied hard in Congress to polish the image of Airbus. In Paris, at the annual air shows, Airbus officials and these politicians proudly displayed the proposed European tanker offering and made the argument that if the United States wanted to sell its weapons to European countries, it should also open its doors to foreign suppliers.
The Airbus 330 is far larger than the 767 that Boeing proposed using. The air force said it was attracted by the plane's larger fuel capacity, its cost and its ability also to carry cargo and passengers.
The deal is the first phase of a multidecade program to replace the aging U.S. aerial tanker fleet, which dates from the Eisenhower-Kennedy era. The fleet, which now numbers about 535 refitted Boeing 707s and DC-10s, is one of the largest and oldest fleets of jets in the world.
Replacing these tankers has been the air force's top priority since 1996, when the government first proposed obtaining new planes. The first 179 tankers will be acquired at a pace of about 15 a year. But it is expected that, over time, nearly 400 new refueling planes will be needed, which could bring the program's total cost to $100 billion.
For more than a decade the air force's effort to modernize the fleet has been thwarted by global politics, Washington scandals and an aggressive attack by McCain, a member of the Senate Armed Services Committee.
In the end, a procurement scandal led to the departure of Philip Condit, the chief executive of Boeing, the resignation of James Roche as air force secretary and the imprisonment of two Boeing executives, one of whom had worked on the program as a Pentagon acquisition official.
The air force, short on cash and wanting to acquire the planes as fast as possible, proposed an arrangement to Congress in late 2001 under which the Pentagon would lease the Boeing 767s in a sole-source contract that would keep Boeing's aging 767 production line alive.
But just as the air force was about to sign that deal, it came under sharp attack from McCain, a former navy pilot. He denounced the deal as a sweetheart arrangement between Boeing and the air force that had been arranged with insufficient scrutiny and oversight, and that would shortchange the taxpayer.
Soon afterward, it was reported that the air force's No. 2 weapons buyer, Darleen Druyun, had been promised jobs for herself, her daughter and son-in-law in return for steering the tanker contract and billions of dollars of other air force business to Boeing. Soon after joining the company in a $250,000-a-year post, Druyun and Michael Sears, Boeing's former chief financial officer, pleaded guilty and received prison terms.
The weight of the scandal caused the deal to collapse in 2004 and opened the door to competition.
Each side spent millions to sharpen its proposal, hire lobbyists and former generals to argue their case and wage extensive advertising efforts in Washington and at military gatherings.
http://www.iht.com/articles/2008/03/01/business/eads.php
January 5, 2006
Norway pulls investments in seven multinationals over ethical concerns
Groups producing nuclear arms components
OSLO (AFP)
Norway has withdrawn investments of more than 500 million dollars (413.6 million euros) from seven multinational corporations, including Boeing and Honeywell of the US, due to ethical concerns over the groups' production of nuclear arms components, the government said on Thursday.
The five other companies are BAE Systems of Britain, Safran of France, Finmeccanica of Italy, and US groups Northrop Grumman and United Technologies.
The withdrawal follows a recommendation from Norway's Advisory Council on Ethics, which is tasked with monitoring the ethics of companies in which Norway places its massive state Pension Fund, formerly known as the Oil Fund.
Norway's finance minister asked the central bank, which manages the fund, to sell the holdings, worth 3.3 billion kroner (416.2 million euros, 502 million dollars). They were sold last year, Finance Minister Kristin Halvorsen told reporters on Thursday. "This does not mean that there won't be other companies (excluded)... Our work will continue," she stressed.
Norway, however, did not withdraw its stake in French oil group Total, in line with the Advisory Council's recommendation. Total has been criticised by several humanitarian aid groups for its controversial business dealings in Myanmar, formerly Burma, which is run by a military junta....
The Advisory Council said it saw "no direct link today between the human rights violations committed by the Myanmar regime and Total's activities in this country." The Norwegian Burma Committee said it was "very disappointed" by the decision. According to the most recent statistics available, the Norwegian state holds 0.679 percent of Total.
Norway's state Pension Fund, into which the state deposits its massive oil and gas revenues, is one of the richest funds in the world. At the end of September 2005, it was worth 1,281.1 billion kroner (161.4 billion euros, 195.2 billion dollars). The sheer size of the fund enables Norway to exert pressure on companies to ensure that their operations are ethical. Norway is the world's third-largest oil exporter behind Saudi Arabia and Russia.
The Scandinavian country has already withdrawn its stakes in 10 other companies, including Thales of France, European Aeronautic Defence and Space Company, and US groups General Dynamics, Lockheed Martin and Raytheon. They are accused of helping manufacture cluster bombs, devices which are particularly lethal for civilian populations. ----
http://nucnews.net/nucnews/2006nn/0601nn/060105nn.txt
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Last update March 16, 2008, by The Catbird