The last 24 hours have been busy news days on the tanker and the 787.
Reuters published a story yesterday about the Air Force calling the CEOs of Boeing and Northrop Grumman on the carpet for the vitriolic nature of the protest. Boeing has been engaged in a high profile advertising campaign that many view as a scorched earth approach toward the Air Force. This was the subject of an in-depth column we did last week on our Corporate Website.
Although Boeing kicked off the latest round with its post-protest ad campaign, Northrop hasn’t distinguished itself, either. In e-blasts, Northrop’s language is as over-the-top as is Boeing’s rhetoric. Both companies, which by their nature fall into the “world class” category, ought to be embarrassed by their respective efforts.
Other tanker news in the last 24 hours: US Sen. John McCain, the GOP presidential candidate who killed the Boeing KC-767 tanker lease deal in 2004 and who has been blamed (unfairly, in our view) by Democrats for killing Boeing’s chances this time around, told the parties to “get on with it,” as outlined in this report by The Moble Press-Register.
The Citizens Against Government Waste awarded US Reps. Norm Dicks (D-WA) and Todd Tiahrt (R-KS) the “Porker of the Month” award (named for pork-barrel projects, a US term for wasteful government spending) for their efforts to kill the USAF tanker contract with Northrop Grumman. This makes a good sound bite, but The Washington Post previously reported that Northrop helps fund CAGW. Northrop did not confirm or deny the funding story when The Post inquired. So take this one with a grain of salt.
On the 787 front, Jon Ostrower last night obtained a memo to employees from Boeing CEO James McNerney, discussing the 787 program and the production model. Ostrower’s Flightblogger has the write-up and the memo. Dominic Gates at The Seattle Times followed with his story and copy of the memo in today’s paper.
Boeing’s first quarter earnings call is tomorrow at 10:30 EDT. The webcast may be found here. Boeing is expected to reaffirm its 2008 earnings guidance (as it did on the program update), but maybe there will be some information about penalties and lost/deferred revenue. We provided an analyst estimate recap in our own estimate on revenue lost through 2013 in our column last week on our Corporate website. The analyst estimates of penalties range from $800 million to $5 billion. Our guesstimate on revenue loss through 2013 is about $30 billion. Extra production costs are on top of these numbers.
An ominous political development for the Northrop tanker award by the USAF may be developing in the US Senate.
An article today in The Washington Post discusses the future of Sen. Robert Byrd, chairman of the Senate Appropriations Committee. Byrd is 90 years old an ailing. He’s been frequently absent from his Senate duties, and here’s where this could become ominous for Northrop. According to The Post, Byrd at times last year turned to Sen. Patty Murray (D-WA) to assume the lead role in appropriations matters.
Murray, known within Washington State (and probably Washington, DC, too) as the Senator from Boeing, has made it her mission to kill the Northrop award. If Byrd’s ill health means turning over reigns, even on spot-issues, to Murray, this does not bode well for Northrop–which, along with partner EADS, has blithely dismissed Murray’s effectiveness as a Senator.
(As a constituent of Murray’s we can attest that she is far more effective than either Northrop or EADS give her credit for.)
Assuming the Democrats gain seats in the Senate in the November election, as conventional wisdom currently concludes, Murray could gain even more clout as a senior member of Appropriations. Regardless of the outcome of the Boeing protest to the GAO over the contract award, Murray’s increasing influence and stature on Senate Appropriations isn’t good news for Northrop.
Boeing and Northrop continue their tanker public relations war. Boeing fired off this press release about the KC-767’s “survivability” vs. the Northrop KC-30.
Northrop fired off a release about jobs, steering people to a 3 1/2 minute National Public Radio report.
Northrop partisans also made sure we saw this biting cartoon.
(For the record, we previously have asked Boeing to send us any similar cartoons supporting the KC-767, but were told none existed. If there are any, we’ll post them.)
Here’s a pro-Boeing cartoon, which for some reason we can’t insert the image, so here’s the link.
In a remarkable piece of reporting, Reuters‘ Andrea Shalal-Esa uncovered the price offered by Northrop Grumman to the US Air Force for its KC-30 and from there the extrapolation of the price Boeing offered for the KC-767.
Reuters also details a number of other cost details in this report.
Here is the Boeing GAO Supplmental Filing of Boeing’s tanker protest.
Update: 1000AM PDT: Boeing just wrapped up a conference call discussing the supplemental filing. The call largely went over the filing, and the Q&A was largely expansive on the filing. Read the filing and you’ll get the gist of the call.
A couple of points of interest:
Boeing expects to have a transcript of the call available later, as well as an audio archive. We’ve asked for the transcript when available and will post it here. The audio archive will be posted at Boeing’s Tanker Blog.
We’ll link select articles as they pop up on the Internet.
Update, April 4, 0730AM PDT: A few articles of interest:
Jed Babbin, former deputy undersecretary of defense for Bush 41, writes another well-reasoned piece on the tanker; he’s a pro-Boeing advocate and he, like his previous writing we linked, does a good job of avoiding histrionics.
Aviation Week’s Amy Butler does another in a series of fine reporting. Her piece is here.
George Talbot, reporting from Boeing’s “enemy territory,” The Mobile (AL) Press-Register, does his usual good reporting with this piece.
Meanwhile, in the Internet website wars, Northrop has launched a new site, America’s New Tanker. This serves as another effort by NGC to rebut Boeing’s PR campaign.
Update 0945AM PDT: Here’s another opinion piece, this one in support of the KC-30, from DefenseTech.org.
From The Wall Street Journal:
The Government Accountability Office denied motions filed by Northrop Grumman Corp. and the Air Force to dismiss parts of Boeing Co. protest of a $40 billion contract to provide aerial refueling jets.
Both companies characterized the developments as victories.
“Boeing’s decision to abandon the public relations rhetoric contained in its original protest filings is in keeping with our motion,” said Northrop spokesman Randy Belote in a statement. Northrop also said that it was encouraged that Boeing “streamlined” its approach.
“This decision is consistent with our view that full consideration of all appeal grounds is warranted,” Boeing said in a statement, calling it a “significant development” in the company’s appeal.
The full article is here.
Update, 400PM: We’ve obtained the redacted copy of the USAF Motion to Dismiss Boeing’s protest (which the GAO has now denied–the Motion to Dismiss, that is). The 49 page PDF provides extremely interesting reading in the dynamics between Boeing and the Air Force.
Update 740PM: Boeing says it did not narrow its protest, and claims this is only Northrop’s “spin.” Here’s a Reuters story.
Reuters just posted this story, citing USAF filings with the GAO.
A move in the US House to adopt legislation to overturn the USAF tanker award to Boeing is ill-advised on a number of levels.
According to a story in The Seattle Post-Intelligencer, Boeing supporters in the House, incensed over the award by the Air Force to Northrop Grumman and Airbus parent EADS selecting their A330-based KC-30 for the KC-45A tanker, are thinking about adopting legislation to block the award. The details, according to the news story:
There are so many things wrong with this approach.
Let the GAO deal with this, like the law allows. If the GAO upholds Boeing’s protest, so be it. But if the GAO rejects the protest, Boeing and its supporters need to let this one go. In fact, Boeing would be better off calling off the dogs on this Congressional fight. Boeing might win the battle but lose the war. The EU won’t sit back idly if Congress interferes, and Boeing will be the one to pay the penalty, not some member of Congress with a few district jobs to protect.
As we previously said, Boeing would be far better off to devote its engineering resources to fixing the 787 program and developing the Blended Wing Body for the KC-Y competition scheduled for 2020. A KC-BWB, and subsequent commercial applications of the BWB, would be far more advanced than the KC-30 or anything else Airbus has to offer, and superior to the KC-777. Go for this gold, and the advanced technology that comes with it. Don’t stick with an airplane originally designed in the late 1970s-early 1980s. Think ahead. Be bold.
Blended Wing Body test model. Source: Boeing
A survey released today (March 22) released by the Pacific Northwest Aerospace Association of 55 companies in the Puget Sound area (Seattle) finds that the loss of the KC-767 contract to Boeing results in the loss of fewer than 250 jobs. Fewer than 400 jobs would have been added.
Boeing had previously projected the tanker contract would have added 9,000 jobs in Washington State and the local politicians have been in an uproar over the job loss because the tanker contract went to Northrop Grumman. The same PNAA survey projects the KC-30 will 13-22 jobs annually. Northrop projects its tanker contract will add more than 4,000 statewide.
The full results of the survey are here.
Separately, as the reader knows there has been a great deal of focus on the fact that a foreign company (EADS/Airbus) is the prime subcontract to Northrop and there are other foreign subcontractors from Europe involved. The stated concern is whether these foreign suppliers will be reliable to the US in time of war.
We think the concern is less about foreign suppliers than it is about Airbus. BAE Systems of the UK is the sixth largest supplier to our Department of Defense. It builds many of the armored personnel vehicles used in Iraq and Iran and has many contracts to DOD and our Homeland Security department, including contracts involving intelligence matters. Fully one third of BAE’s revenue in 2007 came from the US DOD, equaling the revenue from European defense sources.
EADS subsidiaries other than Airbus already have contracts with DOD, and EADS is a supplier to the Boeing 787.
Speaking of job losses, here’s a satirical look at Sen. John McCain’s role in the tanker controversy.
We’re sometimes accused of having a warped sense of humor (guilty) that occasionally gets us in trouble with readers. But we simply can’t help ourselves.
We found something in the Boeing tanker protest that we could not help but chuckle at. Boeing has made a real issue over the inexperience of Northrop Grumman and EADS compared with Boeing on building tankers. Boeing also has criticized the production model of Northrop/EADS. The Airbus A330-200 on which the Northrop KC-30 is based in built in England, Spain, Germany and France and the fuselage components will be shipped to Alabama for assembly. (Not unlike the 787 and KC-767 production models, but that’s neither here nor there).
In the protest, Boeing had this gem:
“…The Northrop/EADS…production process…will hopscotch through Europe to produce some planes….”
Who says Boeing doesn’t have a corporate sense of humor?
Separately, Northrop said in a conference call that 50% of the revenue from the tanker will make its way to EADS, which then has to pay its suppliers. We took a stab at assessing this figure on our corporate website in a report. It looks like we were pretty close in our assessment.