Boeing, Protectionism and the Chicago Connection
CNBC EMEA Head of News
The decision by the Pentagon to hand a $30 billion contract to Boeing to supply refueling planes to the US Air Force has raised eyebrows across Europe and the defense industry as the tender had originally gone to a consortium led by Europe's EADS.
"The decision leaves a bitter aftertaste because it is not entirely clear whether there was a fair procedure at the third tender," German Deputy Economy Minister Peter Hintze told Reuters following the announcement.
Howard Wheeldon is a defense industry expert and a senior strategist at BGC Partners and was surprised by the decision to hand the deal to Boeing.
"That it should be Boeing rather than EADS that won the revised tanker award came as a huge surprise not only to me but to some of the most highly respected defense analysts in the US," Wheeldon said.
"If the decision on the KC-X tanker award that USAF announced in Washington DC last night had been taken purely on the grounds of technology and capability of what each individual plane offered, then I and others would have thought that EADS would have been the most likely to win," he said.
"However, if the award was to be placed on the basis of price or 'buy America' despite the recognized intention of EADS to create a completely new plant at Mobile, Alabama and create 48,000 new jobs then it would probably have been foolish not to have imagined that Boeing would most likely have romped home by a mile," Wheeldon added.
The Boeing plane is a good airplane, but the EADS version is a 'generation in front of its competitor,' he said, giving five reasons why the US Air Force may have chosen Boeing over EADS.
One could be price. "It may have been price that may well have been much reduced by Boeing over the aspects of overall mission capability, available technology, cost of operation and full consideration for through life that led USAF to turn full circle on the award process," he said.
His second reason is American jobs.
"It seems that we may need to question whether 'buy America' politics may just have been allowed to shroud or slant this decision. Of course, back in February 2008 it was not a Democrat sitting in the Oval office, it was a Republican," Wheeldon said.
He also questioned whether state politics played a role even though the USAF is legally required to ignore such factors when awarding contracts.
"One may sense then that Congressional politics played a very big hand in the decision that USAF made," he said.
Wheeldon also questions whether EADS's decision to go it alone without previous partner Northrop Grumman could have played a role.
"The real skeptic though - and that includes yours truly - is duty-bound to argue that as Boeing just happens to have its headquarters in Chicago, Illinois and that this just happens to also be the home state of President Obama, that there might just be a connection," he said.
"I may hope that such thoughts are wrong but quite frankly who on earth am I to argue against perceived wisdom?" Wheeldon said.