Clinton Helps Sell Saudis on Jet Deal Worth $6 Billion : Trade: President intervenes directly with King Fahd to boost U.S. aircraft industry. Boeing and McDonnell Douglas edge out European competitor Airbus.
After direct intervention by President Clinton, Saudi Arabia plans to buy $6 billion worth of new passenger jets from McDonnell Douglas Corp. and Boeing Co., White House and Saudi officials said Thursday.
Clinton took the unusual step of calling Saudi Arabia’s King Fahd on Tuesday to help secure the coveted sale, which is a major lift for the U.S. aircraft industry and especially for McDonnell’s slumping commercial jetliner business in Long Beach.
One source familiar with the conversation said that after Clinton asked the Saudi king to consider buying the aircraft from U.S. suppliers, Fahd replied: “We are certainly going to buy American, we are grateful for what the United States did in the Gulf War, and we like doing business with you.”
Clinton’s call followed months of intense lobbying by Administration officials to help the American companies edge out the European consortium Airbus Industrie. French President Francois Mitterrand reportedly had made strenuous efforts to persuade the Saudis to buy from Airbus.
That the conversation with Fahd took place was confirmed by Prince Bandar ibn Sultan, the Saudi ambassador to the United States, who was in Dana Point on Thursday to deliver a speech to a trade group.
Bandar said the Saudis have yet to decide how many and which type of jets they will order, and McDonnell and Boeing declined comment pending an announcement. Seattle-based Boeing, leader of the worldwide aircraft industry, will probably get most of the sale, which is expected to be 60 to 80 planes.
One source said the Saudis will be discussing their purchasing plans over the next few days with top executives of both Boeing and McDonnell.
The sale of even a few McDonnell jets would be a big boost for McDonnell’s commercial jet operation, which employs 12,000 people at its main plant in Long Beach and another 750 in Torrance.
The division has been struggling to stay alive in the face of tough competition from Boeing and Airbus, the world’s other major aircraft builder, and in the face of an worldwide slump in demand for new airplanes.
(McDonnell also is a major supplier of military aircraft, including F-15 jet fighters that have been sold to Saudi Arabia, among other nations.)
The Saudi order for passenger jets is considered pivotal for the U.S. aircraft industry overall, because it will probably be the biggest sale to reach the industry this year. McDonnell has spent the last year urging the Saudis to buy its planes, mainly its widebody MD-11, which cost about $100 million apiece.
Commerce Secretary Ronald H. Brown met in early May with Fahd and other senior Saudi officials to lobby for the U.S. aircraft makers. The Saudi sale, and Clinton’s talk with Fahd, was first confirmed by Sen. Patty Murray (D-Wash.) in an interview in Thursday’s Seattle Post-Intelligencer.
Clinton, in getting directly involved on behalf of a U.S. industry, was backing a pledge he made in February during a visit with Boeing’s workers. He then promised to help the U.S. aircraft industry in its fight against Airbus.
At the time, Clinton all but blamed recent job losses at Boeing and McDonnell on the Europeans, because Airbus has been heavily subsidized by European government. In January, Boeing announced that it would slash about 25,000 jobs through mid-1994, but much of the cutback is in response to the shortage of new orders from airlines generally.
Clinton’s call to King Fahd “is a tangible illustration that the President is willing to get actively involved in promoting commercial orders for U.S. industry, which is strikingly different from recent experience,” said Wolfgang Demisch, an aerospace analyst with BT Securities Corp. in New York.
“It has to send a very forceful message throughout the Administration . . . that helping U.S. industry in international commercial competition is not only encouraged, but in fact expected,” Demisch said.
Clinton’s action might also help offset unhappiness among some U.S. aerospace officials over the Administration’s recent decision not to let Boeing and General Electric Co.’s jet engine division sell to Iran.
State-owned Iran Air wanted to buy 16 Boeing 737 passenger jets powered by GE engines. But despite appeals by Boeing and GE, the White House has not allowed Iran to buy the planes. Iran Air is now negotiating to buy $1.2 billion worth of passenger jets from Airbus, which will apparently suffer a major setback in losing the Saudi deal.
For McDonnell Douglas, a Saudi purchase order will help lessen the sting of Tuesday’s announcement that the National Aeronautics and Space Administration had chosen Boeing over McDonnell, Rockwell International and Grumman to be prime contractor for the $22-billion space station.
Commercial jets are McDonnell’s main problem. In the first half of this year, the company received no new orders for its passenger jets, and in 1992, net new orders (after cancellations and deferrals of earlier orders) amounted to 36--one for its MD-11 widebody jet and 35 for its smaller MD-80 and MD-90 twin jets. The smaller jets cost $35 million to $40 million each.
McDonnell has been searching for a foreign partner to help finance its commercial jet operations into the 21st Century, but no deal has yet surfaced. Meantime, Demisch said, each new order for the company “is manna from heaven.”
Peltz reported from Los Angeles and Broder from Washington. Times Washington Bureau Chief Jack Nelson in Washington and Times staff writer Chris Woodyard in Orange County contributed to this story.
