Boeing
Written on September 11, 2008
Boeing Co’s (BA.N: Quote, Profile, Research, Stock Buzz) threat to quit a $35 billion aerial refueling competition has won it valuable time to prepare a new bid, and removes a potentially divisive issue from the tight 2008 presidential election.
But the Chicago-based company, which has 27,000 machinists on strike at the moment, may still face an uphill battle to win the contract down the road, analysts said, citing the bigger fuel-carrying capacity of the Airbus A330 offered by Northrop Grumman Corp (NOC.N: Quote, Profile, Research, Stock Buzz) and its European partner EADS (EAD.PA: Quote, Profile, Research, Stock Buzz).
U.S. Defense Secretary Robert Gates cancelled the current competition — already in its second round — on Wednesday, saying it was impossible to decide the bitterly fought contest before the Bush administration leaves office in January.
Northrop had won the huge contract in February, paving the way for Airbus to also begin producing commercial airliners in the United States. But Boeing successfully protested the contract, and then said it needed six months to submit a new bid, given changes made to the terms of the competition.
“Boeing played hardball with the Pentagon .. americashadvance. Boeing was definitely pushing,” said Sen. Maria Cantwell, a Democrat from Washington, where Boeing has huge production facilities.
Boeing pursued an aggressive strategy from the start, mounting its first contract protest in over 10 years, and spending millions on advertisements that sharply criticized the Air Force decision. Then it threatened not to bid at all, which would have been embarrassing for the Pentagon and could have unleashed another firestorm of protest from U.S. lawmakers.
Cantwell also pressured the Bush administration by putting a hold on the nomination of Michael Donley as Air Force Secretary, a stance she says she will maintain until she is certain the process will be open, transparent and fair.
The Air Force had recommended continuing the competition even if it was not concluded by January, but Gates decided it would be better to hold off until the next administration, especially given Boeing’s threat to pull out of the contest completely.
Filed in: legal.