It was just announced that Boeing lost the Tanker contract to the EADS (European) & Northrop Grumman partnership. The contract was years in the making, with the first contract totaling about $40 billion with a potential total recapitalization for old KC-135 tankers of at least $100 billion. Perhaps some jobs were added in Mobile, AL but a lot of jobs and money (think billions) will be lost in America. The new plane will be built in Europe by Europeans instead of in Seattle. And at what cost to the warfighter? Boeing has a strong heritage with the Tanker platform and was advertised as the low-risk solution that kept more dollars and jobs in America.



It will be interesting to see the Air Force debrief when it becomes public. Suffice to say, John McCain has been staunchly against Boeing as a means to show he is a political maverick at the expense of reality, warfighter readiness and our own economy. Basically, that man is not getting my vote.



This is very bad news and an extremely sad day for Seattle, Wichita, and St. Louis; let alone the many American companies and jobs negatively affected in the supply chain.



More here: http://www.stltoday.com/stltoday/busine ... enDocument

^Actually the planes are going to be built in Mobile, Alabama. but yes it sucks.



edit: Actually McCain helped kill the deal the first time around. IIRC, the process was pretty tainted and one of the committee members was sleeping around with a higher up at Boeing.

In 2004, Congress, led by Sen. John McCain, R-Arizona, banned the Air Force from working out a lease and purchase deal with Boeing after a federal investigation uncovered improprieties in the highest levels of the Air Force procurement process.



Critics also complained that Boeing was awarded the contract without competition and that the deal was a bailout for the 767 program, which was facing slumping sales.

Source

^ Negative. The Airbus A330 will be built in Europe utilizing European workers and the European supply chain. It will only be modified into a Tanker in Mobile. I kind of know about these things.

brickandmortar wrote:edit: Actually McCain helped kill the deal the first time around. IIRC, the process was pretty tainted and one of the committee members was sleeping around with a higher up at Boeing.

It is true that McCain killed it the first time around as head of a defense committee. There was no sleeping around, at least as it related to the tanker deal. The issue dealt with a former government employee involved in the DOD procurement process coming to work for Boeing which gave the impression of impropriety. It was never alleged that impropriety occurred, mind you. This resulted in a strong cultural reaffirmation of ethics within Boeing and the government had been impressed with the attention that Boeing has paid to the matter. This knowledge is all public.

OK, but I've read that they are building a plane assembly plant in Mobile, Ala. What does that mean then? I don't know much about building aeroplanes and flying gas stations.

brickandmortar wrote:OK, but I've read that they are building a plane assembly plant in Mobile, Ala. What does that mean then? I don't know much about building aeroplanes and flying gas stations.

A tanker is a derivative airplane, meaning that it is first built from a commercial airline platform. In Boeing's case, a 767 built in Seattle. For Airbus, the A330 in Toulouse, France. A lot of engineering and operations work then go into modifying the airplane into a military refueling aircraft. Mobile is only where the modification will take place. But a large part of the cost is sunk into the commercial airplane that is first built. Multiply that by the potential total recapitalization of 400 some tankers and we're talking serious money that is leaving America. Of course, warfighter need is most important but a net loss for American workers and supply chain can't simply be ignored in the process.

^ Initial reports are that Airbus gained a competitive advantage by offering a larger platform that would carry more fuel/cargo. However, Boeing built to Air Force requirements. I'm sure if Boeing knew that more fuel/cargo was a factor, they would have offered a larger platform. Boeing chose to meet Air Force requirements and provide the flexibility and thus the competitive advantage of enabling more tails in an operational area due to greater size efficiencies. Studies were performed and it was validated that the 767 was the best platform to offer the American warfighter. And by the way, both the A330 and 767 are of similar age. Why penalize an American company for designing to Air Force requirements?



The merger between Boeing and McDonnell Douglas was extremely smart for both companies as it smoothened out harsh cyclical economic factors inherent in the defense and commercial sectors while providing for best of breed synergies between them. It's really kind of silly to suggest otherwise. This is bad news for St. Louis, plain and simple.

^ Dollars to doughnuts, EADS (Airbus) severely undercut the price to a noncompetitive level in order to gain a strong foothold for future recapitalization. Oh, but then they'll raise their price significantly for the American taxpayer. And yes, Europe subsidizing Airbus airplanes appears to be a factor affecting the competitive market. I guess all those hamburgers Sarkozy ate in the Hamptons paid off.

I don't think the fat lady is singing quite yet!



Boeing will appeal/the political ties will start the spin ..chango presto..

they've had this contract for over 50 years and I'd make a small wager

they'll keep a significant part of the business when it's all said and done.

dweebe wrote:But the Boeing is American: so ignore the fact the NG/Airbus scored better.

It's actually more subjective than you think and has more to do with national and international politics than anything. To think that they truly scored better is a bit simplistic and naive. This decision was made at a very high level, higher than mere procurement, and performed to advance foreign policy favors w/ Europe. Think Iran, think European missile shield. Perhaps there will be a protest but it won't matter. Likely they will throw the dog a bone in the form of support contracts.



And of course a given product will have higher value if you price the initial recapitalization as a loss leader to break into the market and are subsidized by individual European governments. Don't get me wrong as I have no sour grapes but let's just be realistic about the whole thing.



Play devil's advocate and smirk all you want because this is bad news for both St. Louis and Boeing. Remember, St. Louis is the headquarters for Boeing's defense unit which just lost the initial $40 billion contract for tanker recapitalization; and all for international favors. And that they do this in the midst of an American recession seems a bit myopic. Just try to capture the gravity of this.

This is some bulls---.

I am F ing furious. Are others not as mad about this as I am. Remember, BOEING is one St. Louis' largest employers. I think at its peak in the M-D days, it had about 40,000 employees. I'm sure the number is down today, but still incredibly high. I'm one Republican that will NOT be voting for McCain, although I'm not sure how involved he was with this deal. It seems that M-D/Boeing/IDS has gotten blow after blow over the last few years. Am I missing out on any good news?

You know... this might actually be good for boeing in the long run.



Boeing screwed itself over by trying and suceeding by doing insider deals with top airforce personel. Of course those people involved are now in jail, it still has put a bad rep on boeing. (This is how all this mess started with)



So now that Boeing got the ultimate slap in the face for doing WRONG, i think they can be considered being "even." Maybe now more European companies will have a change of heart for the US saying, "wow the Americans are doing business with their arch rival aviation company EADS, so I guess it is ok do to business with Boeing.

zink wrote:So now that Boeing got the ultimate slap in the face for doing WRONG, i think they can be considered being "even." Maybe now more European companies will have a change of heart for the US saying, "wow the Americans are doing business with their arch rival aviation company EADS, so I guess it is ok do to business with Boeing.

Umm, no. Boeing won the contract and then lost it in 2003/2004. That was the slap in the face attributed with the procurement issue. This is an altogether different matter. I can imagine things may change under a Democrat president and Congress not willing to sell its soul to make up for a poor foreign policy track record.

innov8ion wrote:

zink wrote:So now that Boeing got the ultimate slap in the face for doing WRONG, i think they can be considered being "even." Maybe now more European companies will have a change of heart for the US saying, "wow the Americans are doing business with their arch rival aviation company EADS, so I guess it is ok do to business with Boeing.

Umm, no. Boeing won the contract and then lost it in 2003/2004. That was the slap in the face attributed with the procurement issue. This is an altogether different matter. I can imagine things may change under a Democrat president and Congress not willing to sell its soul to make up for a poor foreign policy track record.

Well, i would consider this the final slap in the face for this whole deal since now it is over. But as I said before, the A330 is an all superior plane. And if the government can get that for about the same price as the 767, why would we go for our own inferior product? Plus, as many said , if EADS is being subsidized by the EU countries, hell we get the benefit! Plus most of the jobs will be here in the US, it is not a total loss.

^ Perhaps you'd like to tell the American worker they build an inferior plane. Not only is your rhetoric offensive, but your claim against a popular plane is disputable.



Please check your facts regarding jobs as you appear largely uninformed. 44,000 Boeing jobs would have been sustained or been created from this deal in addition to more than 300 American suppliers in 40 states. In comparison, only 5,000 jobs will be created in Mobile, AL for EADS. On top of that, Boeing profits would have stayed in America as opposed to being sent to Europe.



EADS has never built a tanker before whereas Boeing has built them for over 75 years. Who is the low-risk solution? Not only that, but with an EADS tanker, infrastructure will have to be upgraded to handle a larger plane.



This deal is especially interesting considering the US is currently prosecuting EADS in the World Trade Organization for illegal subsidies. So no, illegal subsidies do not benefit America or its workers.

^

Actually they already know the plane is "inferior". T Minus 2 years of orders left until the assembly line has no more orders to fill.

So it is fact not disputable. No one should take offense to it. The A330 is a newer plane, what do you expect? Back in 2001 Boeing recommended the 767 because it was cheap for them to recommended as well as revive the 767 line and make some nice profit.



I can not comment on those "facts" that you have since I do not know what & of revenue will go to Northrop (based in LA) and EADS.



Now, as far as you mentioned "low risk," that is disputable. From Boeings misteps of Project 28 to delays in the 787 program, I would say risk is comparable to that of Heavy Weight Northrop.



By the way, I drive a Toyota. And it looks like most americans are telling their fellow "American Workers" in Detriot that their product is not that great any more.



People and companies have to adapt to the changing environment. Otherwise you will be left behind. But like most, including Boeing, there will be another day.

zink wrote:^ Actually they already know the plane is "inferior". T Minus 2 years of orders left until the assembly line has no more orders to fill.

So it is fact not disputable. No one should take offense to it. The A330 is a newer plane, what do you expect? Back in 2001 Boeing recommended the 767 because it was cheap for them to recommended as well as revive the 767 line and make some nice profit.

If you mean to say the 767 is inferior because it is being replaced by the next generation 787, then that is a silly argument. By the way, the A350 replaces the A330 but Airbus is behind Boeing in development. Illegal subsidies from Europe gave Airbus the ability to even create the A350 when all its money was being sucked by the A380.



The Air Force admits a need for tanker recapitalization now. If they could have waited, perhaps a 787 or A350 derivative would have been reasonable.

zink wrote:I can not comment on those "facts" that you have since I do not know what & of revenue will go to Northrop (based in LA) and EADS.

Regarding jobs, the facts are here: http://news.yahoo.com/s/ap/20080223/ap_ ... rce_tanker. I don't have facts regarding revenue sharing between EADS and Northrop but it wouldn't be unreasonable to suggest something like 80/20. If revenue sharing can be seen as a function of employment, 5,000 divided by 44,000 would suggest a 90/10 revenue split.

zink wrote:Now, as far as you mentioned "low risk," that is disputable. From Boeings misteps of Project 28 to delays in the 787 program, I would say risk is comparable to that of Heavy Weight Northrop.

That is not a smart argument considering EADS was late by approximately 2 years with the introduction of the A380. In comparison, 787 delays are minor and reasonable for a new platform. Given that the 767 platform is tried and true and Boeing has actually delivered the 767 Tanker to Italy and Japan, low risk has been validated. You know, in contrast to EADS never developing a tanker.

zink wrote:By the way, I drive a Toyota. And it looks like most americans are telling their fellow "American Workers" in Detriot that their product is not that great any more.

Say what you will, but Boeing is the leader in the Aerospace industry and America's largest exporter.

innov8ion wrote:If you mean to say the 767 is inferior because it is being replaced by the next generation 787, then that is a silly argument. By the way, the A350 replaces the A330 but Airbus is behind Boeing in development. Illegal subsidies from Europe gave Airbus the ability to even create the A350 when all its money was being sucked by the A380.

No, I am saying it is inferior to the A330. Longer range, more fuel effecient, larger... www.airliners.net to see their stats.

innov8ion wrote:Regarding jobs, the facts are here: http://news.yahoo.com/s/ap/20080223/ap_ ... rce_tanker. I don't have facts regarding revenue sharing between EADS and Northrop but it wouldn't be unreasonable to suggest something like 80/20. If revenue sharing can be seen as a function of employment, 5,000 divided by 44,000 would suggest a 90/10 revenue split.

I have seen your previous posts before and they are always logical... but I think you know that 44k is a BS #. Boeing already employees those people, as well as has their own facility to build the 767. Only new employees would be to beef up the plant. This EADS deal is building a WHOLE NEW plant in AL to actually assemble the darn plane. Of couse the parts are already made from around the world (mostly Germany, England, France)

innov8ion wrote:That is not a smart argument considering EADS was late by approximately 2 years with the introduction of the A380. In comparison, 787 delays are minor and reasonable for a new platform. Given that the 767 platform is tried and true and Boeing has actually delivered the 767 Tanker to Italy and Japan, low risk has been validated. You know, in contrast to EADS never developing a tanker.

Of course Boeing did have their share of problems with delivering those tankers. Including paying a nice fee to Japan for their delay. I just found out the first 767 was just delivered 2 weeks ago. http://www.boeing.com/news/releases/200 ... 9e_nr.html



EADS already has a tanker:

http://en.wikipedia.org/wiki/Airbus_A310_MRTT



Australia, UK, Saudi Arabia, UAE, and now US will be sporting the new EADS Tanker.



It is called Globalization. Why arent you complaining that over half of the new 787 is built outside of the united states? If it weren't for the rest of the world, Boeing would be dead in the water right now as most of their commercial orders are all from other countries.



As a tax payer, if the overall price/value is better going with EADS go with them please.





Going back to St. Louis and this tanker contract, I do not think it will affect them that adversely. I am willing to bet they will go back to the boards for a 777 tanker and win the rest of the orders.

zink wrote:No, I am saying it is inferior to the A330. Longer range, more fuel effecient, larger... www.airliners.net to see their stats.

I think you would agree that inferior is a bit strong of a word. Both tankers were vetted by the Air Force as exceeding requirements.



Tech specs are tech specs, but what about where the rubber meets the road? Here's a quote that explains a key benefit of the KC-767 Tanker, "2. The lack of booms in the fight. Having been a tanker planner for a fighter wing, our problem was not having enough booms ... we had plenty of fuel. The fighter guys needed higher number of tankers so we could refuel more fighters per hour. A smaller tanker, therefore cheaper and takes up less space, would meet this requirement. "



What this means to me is that operational requirements changed from a primary tanking capability to a stronger airlift component after the RFP. I think what we're seeing here is that the Air Force saw funding ending for the C-17 and that they're trying to kill two birds with one stone. Eg, meet their needs for cargo and tanking in one fell sweep. Check this quote: "The article about Key mobility, airlift Studies may stay under wraps as budgets flatten and demand grows. It says Aircrafts like the KC-777 or KC330 would make sense if they decide not to build 222 C-17, but stop when 180 is delivered. Combined with upgrading 112 C-5. Pentagon would like to have more versatility of their aircrafts."

zink wrote:I have seen your previous posts before and they are always logical... but I think you know that 44k is a BS #. Boeing already employees those people, as well as has their own facility to build the 767. Only new employees would be to beef up the plant. This EADS deal is building a WHOLE NEW plant in AL to actually assemble the darn plane. Of couse the parts are already made from around the world (mostly Germany, England, France)

Thanks for the compliment. I think your posts generally contain good insight as well. New plant or not, this is a net loss of jobs for America during a recession. The 44,000 number is subjective to an extent, but the truth is that a large number of employees can't simply be absorbed back into the system without contracts.

zink wrote:

innov8ion wrote:That is not a smart argument considering EADS was late by approximately 2 years with the introduction of the A380. In comparison, 787 delays are minor and reasonable for a new platform. Given that the 767 platform is tried and true and Boeing has actually delivered the 767 Tanker to Italy and Japan, low risk has been validated. You know, in contrast to EADS never developing a tanker.

Of course Boeing did have their share of problems with delivering those tankers. Including paying a nice fee to Japan for their delay. I just found out the first 767 was just delivered 2 weeks ago. http://www.boeing.com/news/releases/200 ... 9e_nr.html

Any new development program will have some challenges and the niggles are worked out over time. That's why contracts are structured to manage risk. Ask Airbus regarding its A380.

zink wrote:It is called Globalization. Why arent you complaining that over half of the new 787 is built outside of the united states? If it weren't for the rest of the world, Boeing would be dead in the water right now as most of their commercial orders are all from other countries.

As you suggest, this is a global market. Boeing is America's largest exporter. To sell in a global market, it helps to partner with companies and utilize the supply chain in the home market. It really does benefit America overall to do so. What I'm saying is that America is losing out on a large chunk of jobs and $$$ w/ the KC-45. That's the way the cookie crumbles, I suppose.

innov8ion wrote:As a tax payer, if the overall price/value is better going with EADS go with them please.

From what I hear, the cost was pretty even.

innov8ion wrote:Going back to St. Louis and this tanker contract, I do not think it will affect them that adversely. I am willing to bet they will go back to the boards for a 777 tanker and win the rest of the orders.

The incumbent has a strong advantage in follow-on procurement contracts. To Boeing's possible favor, a follow-on may likely be based upon a newer platform. From what I read publicly, there could be a plan for a redesigned 777 based upon technologies used in the 787 and beyond. It's speculation of course, but common sense dictates there will be a redesign at some point. Check it out here: http://en.wikipedia.org/wiki/Boeing_Y3. I think the initial recapitalization will take about 15 years putting the next contract at around 2023. I'm guessing the timing would be right to offer a 787 or next generation 777 tanker. Depending on ever-moving requirements, of course.