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Northrop "Grounds" Work On Air Tanker--Blames Boeing Protest

Tuesday, 1 Apr 2008 | 3:07 PM ET
Northrop Grumman
AP
Northrop Grumman

Northrop Grumman updated analysts with a conference call on the KC-45 tanker program--the $35 billion contract Northrop and EADS beat out Boeing to win.

Boeing has filed a protest, and today Northrop said it has completely stopped work on the tanker until a review of the protest is completed by the Government Accounting Office. That review should be done by June 23rd, and if the deal still stands, Northrop will get back to work.

Northrop executives were blunt: Boeing is a poor loser. "Did you want an open and fair competition?" said Gaston Kent, VP of Investor Relations. "We got that, and we won." He said an earlier attempt by the Air Force to strike a tanker deal with Boeing (the one that ended in scandal) wasn't a competition, "and it failed."

The company also took on the political assault its suffered for partnering with a European company accused of unfair government subsidies. Northrop says all the uproar about French involvement in the new tanker is overblown. The French are putting in "about 13 percent" of the content in the new tanker.

Northrop provided slides implying the 767 tanker Boeing offered up isn't really all that "American." A color-coated rendering of the 767 claims to show many plane components come from Japan, Italy, China, and the UK. As for job losses because of the Northrop win, the company says "that is completely false." According to its figures, the Northrop Grumman-EADS win will create 48,000 new direct or indirect jobs in the U.S., versus 44,000 if Boeing had won.

Finally, any Congressional effort to ban a foreign manufacturer from providing the airframe for a U.S. military jet "would corrupt the entire acquisition process." Northrop officials pointed to the international collaboration on Lockheed's Joint Strike Fighter, saying the U.S. could expect a backlash if we tell our allies, "You have to buy our stuff, but we refuse to buy yours."

The company also provided a timeline of funding for the tanker program going out to 2012:

2008: $314 million
2009: $1.1 billion
2010: $2.5 billion
2011: $3.1 billion
2012: $3.2 billion

That's a lot of money.

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  • Based in Los Angeles, Jane Wells is a CNBC business news reporter and also writes the Funny Business blog for CNBC.com.

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