Boeing Co. (NYSE: BA) filed a formal protest this week against the U.S. Air Force's decision to award its $35 billion contract for refueling tankers to EADS, the parent of Europe's Airbus. The value of the contract could grow to $100 billion over the life of the program, and Boeing is not going to let that money slip away easily.The decision has generated a lot of political heat in the U.S., as politicians decry the loss of American jobs and American profits. The problem is, though, that the United States loses no matter which firm gets the contract.
If Boeing is given the contract, the U.S. gets lower quality planes in smaller numbers. By all accounts, the Boeing tanker, based on the 767, is smaller and older than the EADS tanker, based on the larger and newer Airbus A330. And EADS promised to deliver more of the planes at an earlier date. As BloggingStocks' Peter Cohan wrote when the decision was made, the choice between the two planes wasn't close on the merits.
On the other hand, if EADS gets the contract, the U.S. loses tens of thousands of high-paying, high-tech defense jobs. Boeing claims the contract would provide over 40,000 jobs. Although EADS claims that it would assemble its planes in the U.S. and provide roughly 20,000 American jobs, it's pretty clear that most of the tanker-related jobs would be in Europe, where most Airbus parts are made.
So it's a lose-lose situation. Either you get jobs, exorbitant corporate profits and inferior planes, or fewer jobs, no (American) profits and superior planes. Usually, our lion-hearted men and women of the U.S. Congress chooses the former course. We'll see if their preference for the latter will survive the growing political storm.











Reader Comments (Page 1 of 1)
3-14-2008 @ 11:28AM
dak said...
Do you think McCain had his hands in this?
http://www.nytimes.com/2008/03/12/us/politics/12tanker.html?ref=us
"Mr. McCain’s campaign co-chairman, former Representative Thomas Loeffler, a Texas Republican, also runs a lobbying firm, the Loeffler Group, which earned $220,000 working for EADS in 2007. Mr. Loeffler was the McCain campaign national finance chairman when his firm was hired to lobby for EADS."
3-14-2008 @ 11:57AM
hank said...
michael,
you have some errors in your article.
northrop will actually be adding hundeds to thousands of american jobs in a brand new aircraft assembly plant in mobile, al, along with jobs all across the US building parts for the new tanker. EADS will be shipping parts to the US for final assembly in AL.
boeing on the other hand will not add as many jobs because they are just milking an existing product line. and if you actually concerned about losing american jobs, ask boeing why the majority of the 787 is being built outside of the US. read this paper and see what wonderful things boeing is doing for the US airframer industry:
http://www.custac.buffalo.edu/docs/OccasionalPaper30.pdf
3-14-2008 @ 12:02PM
sonnype said...
I find it ironic that Boeing would claim that their not getting the contract will cost thousands of American jobs while much of Boeings Dreamlinner is built overseas and assembled in this country.Boeing seems to have no problem using foregin manufactures to build its new plane.
3-14-2008 @ 1:18PM
Claude Foutch said...
Boeing & EADS received the same rating on eval criteria of: 1. Mission capability 2. Risk 3. Past performance 4. Cost/price performance 5. Integrated Fleet air refueling assessment.
Somewhere, sometime after this initial eval the AirForce ADDED additional tests or requirement MIDSTREAM and disqualified Boeing on the added criteria. Normally, in most procurement processes this would have triggered re-bids; however, in this case it did not. Did Boeing know about the added tests in time to adjust? Did Boeing demand the right to re-bid? The A330 and BA767 are both proven airframes, having flown millions of passenger miles. The 330 is larger, heavier and will need stronger, larger facilities costing more in construction and maintenance over the life of the airframe. The fact that Boeing is outsourcing part of the 787 has zero to do with the tanker. EADS aircraft are all subsidized by France, Britain, Spain and elsewhere with tax monies. Boeing built the 767 with company resources only. I smell a political issue here and it must be rooted out. As a taxpayer I want my warfighter to fly American manufactured airframes.
3-14-2008 @ 1:28PM
Chris said...
Cohan didn't write "the choice between the two planes wasn't close on the merits.". He simply regurgitated BusinessWeek's article which stated that Loren Thompson had come to that conclusion.
It's also worth noting that Airbus, and workers in the United States, will gain from a production facility in the US. It could very well lead to additional manufacturing of commercial airbus products in the US at the expense of European jobs in the long run.
3-14-2008 @ 3:26PM
Alan said...
Not exactly true that the KC-767 is inferior to the KC-30. Sure, the KC-30 is bigger and can carry more, but it also uses more ramp and hangar space, and consumes more fuel, too. It's not clear that the USAF would need that much extra capacity as even the smaller KC-135s they have now rarely use all the fuel they carry.
Also, just because the 767 was designed years earlier than the A330, doesn't make it really older. The 767 (and the A330, also) is constantly being improved and the planes are being built today. They're both new airplanes.
If the USAF gets either tanker, they'll get a fine airplane that's better than the current KC-135s that are half a century old and falling apart. That's a win!
3-15-2008 @ 8:25PM
Ken said...
The manufacturing guys over at Evolving Excellence have also been taking Boeing to task, first in terms of the hypocrisy of whining about losing the tanker deal to NG/Airbus at:
http://www.evolvingexcellence.com/blog/2008/03/boeing-whiner-e.html
Then the even greater hypocrisy of the politicians that are siding with Boeing:
http://www.evolvingexcellence.com/blog/2008/03/so-whos-more-pa.html
Ken
3-16-2008 @ 7:48PM
Dan said...
Northrup or EADS has never built a tanker and they are going to build them in Mobile. Yet Boeing is the bigger risk? i dont think so if a hurricane hits Mobile with 100 airframes on the run way how many are going to survive. And boeing is the bigger risk. Give me a break. This looks like a fix if you ask me.
3-17-2008 @ 12:03AM
Walt528 said...
We keep beating the horse , BUT....
If the USAF really wanted a BIGGER airplane the 777 base could have been used as the "Spec" plane.
Longer range, larger payload, Newer design. (“Bait & Switch” Specs.?)
The EADS/Northrup plane will be built in Europe I am told then modified to add the tanker (or part thereof) in the USA. Some comments may be sourced in the US. NOT BULIT HERE, I am told.
Also the 787 is sourced globally for components, from multiple sources, US and OFF SHORE. The Carbon Fiber molds are from a suppler off-shore and ALL of this and FINAL ASSEMBLY IS IN EVERETT Wa. By BOEING EMPLOYEES here in the GOOD OLE USA.
Buy American. Be True to the Red-White & Blue
Whether there was in "Inside" job done for "donations" to the political funds, may or may not be true in this case. BUT, this happens every day in Government contracts (read Super Capitolism, by Robert Reich) from the "Victor come the Spoils" to the Party of their influence. The New American way.
In God they trust...All others send CASH!!
QED.
3-17-2008 @ 4:42PM
Brian A Davis said...
Inferior planes....Where do you get this information? Our planes are built far better than our Airbus competitor. Fact is our planes are probably built a little to well. 707 and 727 are stilling flying around. The Current tankers aren't exactly falling out of the sky. If they do it'll be the Air Forces fault because the airframes are sound. B-52's could be the only plane in history to be in the Air Force service for 100 years. Our planes are built well to say the least. The 767 may not have went over well to the airlines but it wasn't because the plane wasn't built well. It's just more suited to a cargo role. However most prefer the 747 for this... It wasn't well thought out for the market it was built for. The Tanker though would've been a big shot in the arm for the 767 though to which it would've been well suited. The Air Force requested a plane of this size and Boeing provided it. However Airbus built a bigger plane than was requested. Boeing asked if thy should build the tanker on the 777 and the Air Force said "no need".... So now we lose jobs making an established workforce have to relocate. Selling their homes that won't sell well during these bad economic times and then moving far away to another state where the houses prices just went up. Gained jobs verses lost jobs and displaced families doesn't make good sense. Sending our tax dollars and jobs overseas is just plain stupidity! If the Air Force needs the tankers faster I'm sure something could be worked out. Having EADS in the door won't be good for future the future of Lockheed or Boeing.....The EU years ago made sure that Boeing didn't use any of the money received through military contracts would go into Boeings Commercial Airplanes.....Imagine that! Them telling US not to subsidize.... They just want to deal the knock out blow that'll shut us completely down. America one day will just be a farming community again with Europe calling the shots... McCain, Hillary and Obama should be replaced because I want different choices. There isn't any lesser evils with the current choices.
3-24-2008 @ 4:04PM
Les Lennox said...
The United States has some strong forces to protect us from invasion by a foreign country.NORAD come to mind. But we are not as well protected from foreign countries who would scheme to plunder our aerospace industry,and especially,when they have help from within, as is the case with EADS/AIRBUS
NORAD may not be able to protect us from France trying to plunder our aerospace industry,but a House Defense Appropriations Sub-Committee can
VIVA LA UNITED STATES
3-31-2008 @ 11:17AM
Steve said...
The arguments from Davis and others above are simply arguments from emotion and hurt ego. This was Boeing's to lose, and lose they did - quite spectacularly.
If anyone here really thinks that sweetheart deals to a monopoly such as Boeing has enjoyed for all of these years is a good thing, then you deserve whatever you get. It's about time that Boeing and its "entitled" union thugs get a big clue and "cracks the code" here. Boeing should stop whining and try actually producing the current plane orders they have on time. They are a massive risk because they can't deliver what they have been asked to.
The new aerospace corridor in the southeast will produce an incredible amount of NEW jobs and needed wealth for that area. Boeing will keep its own people happily employed, and hopefully, just maybe - they will go back to the drawing board and start really working on taking care of the customer for once, instead of arrogantly shoving old tech down taxpayers throats with corrupt, no-bid sweetheart deals.