Despite the hue and cry that American interests were hurt when the U.S. military gave its new tanker order to Northrup Grumman Corp. (NYSE: NOC) and EADS, the parent of Boeing Co. (NYSE: BA) rival Airbus, one big company based in Connecticut did very well. That would be General Electric Co. (NYSE: GE).
According to the Business Courier, "the planes will be powered by GE's CF6 jet engines." Due to the large number of planes involved, GE will build 400 engines and bring in about $5 billion.
The news adds to the economic complexity surrounding the politics of the contract. A number of congressmen believe that a company based in France, EADS, should not be building planes for the U.S. military. Picking Boeing, based in Chicago, would have been a more patriotic decision.
But, the math may not be all that simple. Northrop Grumman is clearly a U.S. company, and GE is getting a huge contract. There is no saying that Boeing might not have used Rolls Royce engines and other significant components from other countries.
The military award may be better for U.S industrial interests than most people think
Douglas A. McIntyre is an editor at 247wallst.com











Reader Comments (Page 1 of 1)
3-02-2008 @ 10:49AM
Steven said...
The team members on the KC-767 have already been identified, and UTX P&W division was named as the engine supplier for the tanker. Therefore, it rules out Rolls Royce. The $5 Billion that GE gets for engines would have instead gone to UTX, so in effect, that portion of your "math" is muted.
Will the Air Force next ask the NOC / EADS team to bid on the next generation of AWACS ?
This award STINKS, and it wll end up being a fiasco with huge cost overruns and long delayed deliveries similar to the Presidential helicopter contract that also went to a LMT / European team.
3-02-2008 @ 12:54PM
Kent said...
I wonder if this decision was backed by the assumption that the U.S. Dollar won't remain weak against the Euro indefinitely. Is there a clause in the contract that addresses currency adjustments as part of the bargain? I think it would. Hopefully, the price of the KC's are pegged on the Euro.
3-02-2008 @ 3:21PM
Hugh Jampton said...
Steven, do you always spit out your dummy when you can't get your own way? The only reason that GE engines were chosen over Rolls Royce was because the US Navy said they would shoot the Airbus Tankers down. Remember the P51, absolute crap until they put a Merlin engine in it.
3-02-2008 @ 4:46PM
Steven said...
Hugh....what is your problem.
I just stated a fact that the P&W engine was the BA tankers propulsion as identified by Boeing.
Made no comment about either the GE or Rolls engine.
My comment was to correct the "math" stated in the blog.....that no matter who won, it was going to be a US engine.
3-02-2008 @ 5:31PM
joseph said...
Hugh, Steven is saying that the engine issue is a wash because 767 would have Pratt & Whitney power-so, your mention of Rolls Royce makes no sense, neither does the "USNavy" reference. The great story of the Mustang is not relevant here. And....you're very rude. Think about it.
3-03-2008 @ 2:22AM
Steve Real said...
We're paying off the Europeans to stay in Afghanistan.
I think that's the short of it, politikally speaking.
Personally I love Paris, France.
They're great people and I really had a nice time in Paris and I can't wait to go back someday too with kids and the old lady.
But the fact that I'm married to a European doesn't mean that I'm going to lobby for French jobs.
I think a lot of this is the Administration paying back the Europeans for sending more troops to Afghanistan.(ie. UK, France and Germany)
It could be used as a politikal wedge to push the Europeans to do even more in the future, besides sitting on their lilly white derrieres in Northern Afghanistan.
Yes when W' goes to Europe this year the French are going to have to kiss his derriere for giving the French all those American jobs.
So you Europeans better recognize what really is going on.
Vive la France!
3-03-2008 @ 2:24AM
Steve Real said...
GE does not build one jet engine in Connecticut.
3-03-2008 @ 9:46AM
Sean said...
I think people need to get a grip. The EADS planes are better for this task (fly farther and can carry more fuel).
I, for one, am glad that the Air Force can be allowed to make a decision that's better on technical grounds. It's not ok to have all of our planes coming from one manufacturer.
It will make the marketplace better if other manfacturers believe they can compete on even playing field.
3-04-2008 @ 10:38AM
Greg said...
The wail of "support our troops" seems to diminish in this controversy. The Pentagon choice, said to be based upon a more recent design and technology, better fuel economy and greater payload, is being second-guessed by those who wish to keep the jobs here, even though there seems to be no such thing in this age of globalization.
3-04-2008 @ 10:41AM
Greg said...
Steve Real: does Connecticut receive tax revenue for hosting the GE corporation?
3-04-2008 @ 11:50AM
Fred said...
Wouldn't the EADS tankers be built in Alabama? I believe the GE engines are made in Ohio.
I am not very familiar with this area but I read an article saying the contract decision was not even close.