After a decade of embarrassing missteps and disputes, the Pentagon handed the first phase of a job-rich $35-billion contract to Chicago-based Boeing Co. to build a fleet of 179 aerial refueling tankers that carries the promise of work for an estimated 50,000 aerospace employees.
In an announcement that took industry experts by surprise, word came down late Thursday that Boeing had bested archrival Airbus and its parent company European Aeronautic Defense & Space Co., or EADS to build 18 planes for $3.5 billion.
The fight between Boeing and EADS was bitter and hard fought. The lucrative tanker contract is believed to be the last new major Pentagon purchase for years to come.
“Boeing was the clear winner,” said William J. Lynn, deputy secretary of Defense, in making the announcement. “We went through a process that evaluated war-fighting requirements, evaluated price, evaluated life-cycle costs. And the process yielded the result it did with Boeing winning.”
While much of Boeing’s assembly work will be done in the company’s plants near Seattle and Wichita, Kan., suppliers in Southern California will also be busy, churning out parts for the fleet that will replace the nation’s Eisenhower-era tankers.
The winning bid was based on a modified Boeing 767 passenger jet. The military depends on the tankers all over the world because they refuel bombers, fighters and cargo planes in midair beyond America’s shores.
Boeing has said that its winning bid would mean about 4,500 jobs in California, including at Raytheon in El Segundo, Alarin Aircraft Hinge Inc. in the City of Commerce and Lamsco West Inc. in Santa Clarita.
Such a large order of planes will keep the grinders, lathes and milling tools buzzing at Sonic Industries Inc.'s machine shop in Torrance. The small business has about 180 employees on site and will be on the lookout for more to manufacture high-strength fasteners for the tanker’s tail, wings, and engine.
“A win for Boeing is a win for us,” said Jim Hawryla, director of marketing at the firm. “We’ve been supplying to them since 1964.”
Rocky Garza, 56, a night foreman at the facility, said Sonic would probably be “looking for some good machinists to fill positions.”
The announcement stunned many aerospace industry analysts who thought that EADS and its larger contender, an aircraft based on an Airbus A330, was a sure to win. || Related graphic: Comparing the Boeing and Airbus tankers
“I don’t think there was an analyst out there who picked Boeing to win this contest,” said Scott Hamilton, an aviation industry consultant in Issaquah, Wash. “Everybody thought they were going to lose. I think Boeing thought they were going to lose.”
The fight between Boeing and EADS was bitter, hard-fought and heavily lobbied in Washington. With so much money and jobs at stake, the decision had national implications and strong political overtones.
Follow-up tanker contracts could involve more than $100 billion over several decades, analysts said.
Boeing officials were ecstatic at the prospect of taking home the program for the second time in the drawn-out contracting process.
“We’re honored to be given the opportunity to build the Air Force’s next tanker and provide a vital capability to the men and women of our armed forces,” said Jim McNerney, Boeing chief executive. “Our team is ready now to apply our 60 years of tanker experience to develop and build an airplane that will serve the nation for decades to come.”
In Congress, Boeing’s boosters were also thrilled.
“This is the happiest day of my professional career,” said Rep. Norm Dicks (D-Wash.), a chief Boeing supporter on the House Appropriations Committee. “We’ve been at this for 10 years and I think the Air Force has finally got it right.”
Sen. Patty Murray (D.-Wash.) talked about the importance of new jobs.
“At a time when our economy is hurting and good-paying aerospace jobs are critical to our recovery, this decision is great news for the skilled workers of Everett [Wash.] and the thousands of suppliers across the country who will help build this critical tanker for our Air Force,” she said in a statement."This decision is a major victory for the American workers, the American aerospace industry and America’s military.”
The mood was grim in Mobile, Ala., where EADS had planned on building their planes if it had won. A crowd of about 200 that included elected officials and local business leaders fell silent at the Mobile Convention Center when the decision came.
“We are certainly disappointed, but not discouraged,” said Mobile Mayor Sam Jones. “After a debriefing, if we learn that the decision was made on a fair assessment of the merits, we don’t have any political rhetoric, we are ready to move on to other opportunities.”
Efforts to replace the tankers started in 2001. Boeing was first awarded the contract in 2004, but the contract was withdrawn because of an ethics scandal that resulted in prison terms for a former senior Boeing executive and a former high-ranking Air Force official.
When the Pentagon relaunched the competition in 2007, Northrop Grumman Corp. of Century City decided to team up with France- and Germany-based EADS, despite facing political backlash for joining with a foreign entity.
Northrop and EADS took home the contract in 2008 in a huge upset, because Boeing had built all of the 415 tankers in the current fleet. But the decision was overturned amid a storm of protests by Boeing and its supporters, and, after new specifications were released, Northrop dropped out.
But EADS went at it alone and now that the latest decision has been made, the fight might not be over. EADS has 10 days to file a protest with the Government Accountability Office.
“With a program of such complexity, our review of today’s decision will take some time,” EADS North America Chairman Ralph D. Crosby Jr. said in a statement. “There are more than 48,000 Americans who are eager to build the KC-45 here in the U.S., and we owe it to them to conduct a thorough analysis.”