EU warns against protectionism in billion dollar Air Force contract | Europe| News and current affairs from around the continent | DW | 09.03.2010
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EU warns against protectionism in billion dollar Air Force contract

The EU has warned against US protectionism, after European aerospace giant EADS said it was dropping out of a multi-billion dollar contract bid process. American rival Boeing is now the only bidder.

Tanker plane illustration

EADS couldn't fly solo in the billion-dollar bidding war

The EU has warned Washington of negative consequences for future defense deals between the US and Europe if a recent contract for Air Force air-refuelling tankers is proven to have favored a US company.

The European Commission called the decision by a European-led consortium not to submit a bid for the Pentagon's contract for refuelling tankers "highly regrettable."

"The European Commission would be extremely concerned if it were to emerge that the terms of tender were such as to inhibit open competition for the contract," a statement from Brussels said.

A Boeing KC-767 in flight

Boeing's smaller KC-767 model is poised to win

The German government also expressed disappointment. "Even in the acquisition of munitions, free competition should not be unilaterally restricted," Economics Minister Rainer Bruederle said.

European aerospace giant EADS withdrew its bid on Monday for $35 billion (25.7 billion euros) in tanker plane contracts with the US Air Force, saying the terms of the deal appeared designed to favor a smaller jet offered by American rival Boeing.

The announcement left Boeing as the only bidder.

The European Aeronautic Defense and Space Company, parent company of Airbus, had joined forces with US firm Northrop Grumman to compete with Boeing over the contract to build 179 tankers, which refuel warplanes.

The EADS move came after Northrop Grumman dropped out of the bid for the contract, which would have guaranteed thousands of manufacturing jobs in Britain, France, Germany and Spain.

Hours after dropping its bid the European aerospace giant announced it lost 763 million euros (1.04 billion dollars) in 2009.

Bitter battle comes to an end

The decision followed a two-year struggle against American protectionism, and ended a bitter political battle over the deal, which is among the biggest US defense procurement projects on record.

In presenting his decision, Airbus CEO Thomas Enders criticized the Pentagon for presenting guidelines that he said clearly favored Chicago-based Boeing.

"The current bid is clearly tailored to the smaller and less-capable refueller of the competition," Enders told German press agency dpa. "The conclusion is clear: This is not about the best tanker and also not about a fair competition."

Possible no-bid contract

The US Defense Department said it was disappointed by the EADS-Northrop decision, but it denied accusations of unfairness. The Pentagon may now be forced to award a contract to Boeing without any competition, a practice US President Barack Obama has sharply criticized as a bad deal for taxpayers.

Meanwhile, Boeing used the announcement to talk up its own model for the tanker, based on the commercial 767.

"The Boeing NewGen Tanker will be safe and survivable in combat, will save the American taxpayer $10 billion in fuel costs over its 40-year life, and is American-designed and built," Boeing spokesman Bill Barksdale said in a statement.

Portrait Thomas Enders

Airbus's Thomas Enders was critical of the Pentagon

EADS and Northrop were offering a larger model based on the Airbus A330, which they claimed had greater capability, lower risk and better value despite its size.

Fight for jobs

The Air Force has sought to replace its 1950s-era set of Boeing tanker planes for years. The Pentagon originally awarded the contract to EADS and Northrop, leading critics in the US to decry a loss of jobs to European manufacturers when they were most needed at home.

Boeing was later able to convince a congressional oversight agency to reverse its decision in June 2008, and the Defense Department officially reopened the competition last month.

Support for EADS-Northrop was concentrated in southern states because of Northrop's promise to build an assembly plant in Alabama. The aerospace duo said 58 percent of the plane and its parts would be assembled by American labor.

The decision to drop out of the competition was a setback for EADS' plans to expand into the enormous US defense market, where its current presence is relatively small.

Editor: Jennifer Abramsohn

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