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Examining Airbus' U.S. Military Coup

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Examining Airbus' U.S. Military Coup

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Examining Airbus' U.S. Military Coup

Examining Airbus' U.S. Military Coup

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Boeing lost a lucrative aircraft contract Friday with the U.S. military. The $40 billion deal was instead awarded to a consortium of businesses that includes Boeing's chief rival, European-owned Airbus. Europeans reacted with glee over the prospect of new jobs and an economic boost.

SCOTT SIMON, host:

While U.S. manufacturers and labor unions seethed over the Pentagon contract, Europeans were happy at the prospect of new jobs and economic boosts. Still, in some political and business circles, Europeans kept their joy muted, aware that they can't risk further antagonizing their American partners.

Eleanor Beardsley joins us from Paris. Eleanor, thanks for being with us.

ELEANOR BEARDSLEY: Good to be with you, Scott.

SIMON: And share with us, please, the reaction to this news in Europe today.

BEARDSLEY: Well, it broke very late last night, and I think the first reaction was complete surprise because everyone thought Boeing was a shoe in. It was on the TV and radio this morning. It's on the front page of every newspaper and there's a lot of joy and pride, I mean because this is, you know, finally a European space and defense contractor getting a foothold into very lucrative American defense market, and no one expected it to happen and they've really scored big this time.

SIMON: The head of EADS, Louis Gallois spoke this morning, I guess.

Mr. LOUIS GALLOIS (COE, EADS) (French Spoken)

BEARDSLEY: Right, that's Gallois. Well, first of all, he called it a major coup in the American market. But then he also stressed the partnership. He said EADS didn't do it alone. They did it with Northrop Grumman and General Electric that's going to provide the motors for these tankers. So he stressed that it was the teamwork that in fact beat Boeing in the end.

SIMON: What's the European response to some people in the United States who charge that A, Pentagon - the Pentagon is essentially subsidizing the Airbus and B, potentially giving away military secrets.

BEARDSLEY: Well, first of all, some analysts I've talked to have said it's a two-way street. You know, the Europeans have been buying military hardware from the U.S. for a long time and it's not the first time that the U.S. has bought military hardware from Europe, this is just the biggest - this is a coup of a contract.

And everyone keeps emphasizing, you know, EADS is not Airbus, although Airbus planes will be used, and Northrop Grumman is really the one who signed the contract. They're the ones negotiating with the Pentagon. They're the, you know, the American foothold. So they're going to be really dealing with - it's going to be Airbus bodies of an already successful commercial plane, the A3-3200, it's a freight plane. They're going to, you know, change these, modify them and give them all the military systems that they need, and Northrop Grumman will be in charge of doing that.

SIMON: And the analysis you're reading there, how did the EADS manage to win the contract, do you think?

BEARDSLEY: Well, you know, I think they clenched the deal by playing the economic patriotism card. You know, EADS knew that they weren't going to go in there and negotiate with the Pentagon. They needed a good steady American partner to do that, so they teamed up with Northrop Grumman, and they said we - if we get this contract, we will not only assemble these tanker planes in the U.S., which seems normal because you wouldn't want a U.S. tanker plane coming off an assembly line in France or Germany, but they also agreed to transfer from Toulouse, France, the assembly lines there, to Mobile, Alabama, the entire assembly line of the commercial version of the planes.

So they've sweetened the deal. They've said, we'll provide it, you know, it's going to be up to 3000 jobs in Mobile, Alabama, but by transferring the assembly of the tanker and the commercial version of that plane to the U.S., EADS is also serving its own interest because as you know, right now the powerful Euro is really hurting Airbus because planes are sold in dollars. So it's been looking to outsource, it's been looking to transfer some of its manufacturing to the dollars that are in the U.S. anyway. So that card obviously worked. In some way, it swayed the deal in some way.

SIMON: Eleanor Beardsley in Paris. Thanks so much.

BEARDSLEY: Thank you.

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Northrop, EADS Beat Boeing for Pentagon Contract

Northrop, EADS Beat Boeing for Pentagon Contract

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The Air Force has awarded a huge defense contract to build midflight refueling tankers to the team of Northrop Grumman and Airbus parent EADS, in a deal that could be worth up to $40 billion over the next 10 years.

The initial contract is to build nearly 200 jet refueling aircraft, as the Air Force moves to phase out its aging fleet of planes that are used to extend the range of fighter jets and other warplanes.

In winning the contract, Northrop Grumman Corp. and its European partner, EADS, won out against Boeing Co., which had previously won a contract to provide leased tanker aircraft to the military.

The bidding for the contract brought about a scandal in 2004, when two former Boeing officials were sentenced to prison terms after conflicts of interest were uncovered.

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