Marathon Pundit: Hot air from France on Air Force tanker deal

Friday, March 12, 2010

Hot air from France on Air Force tanker deal

I am a supporter of free markets. Barrier-free trade benefits consumers, and yes, sellers. Competition keeps them on their toes. Which of course further benefits, you guessed it, consumers.

Now a consumer can be your humble Morton Grove blogger, or the United States government. And the latter is taking some heat from French President Nicolas Sarkozy, who is crying sacré bleu over the competition to develop a new in-flight refueling tanker, currently known as the KC-X.

Our military needs new tankers, two bidders emerged for the lucrative contract: Chicago-based Boeing and Airbus/EADS, a European firm deeply rooted in France, which partnered with an American corporation for the project, Northrup Grumman.

But French President Nicolas Sarkozy is crying sacré bleu, claiming the Pentagon has a bias for Boeing. On Monday the Airbus/EADS/Northrup Grumman partnership backed out of the bidding, and Sarkozy is pointing his finger at the United States, bemoaning, "I did not appreciate this decision ... This is not the right way to behave. He goes on to declare, "If they want to be heard in the fight against protectionism, they should not set the example of protectionism."

But a closer look at this controversy leads me to another conclusion. Airbus/EADS/Northrop Grumman pulled out to save face--because it offered a tanker that just didn't measure up.

Writing for the Examiner, Dan Spencer explains:

Northrop was planning to offer an Airbus plane that was simply too big and ill equipped for what the Air Force needs. Northrop's French partner actually began a campaign to criticize the U.S. Military for those specs -- something reminiscent (and not in a good way) of the long history of French criticism of U.S. defense policies.

Then there is the jobs issue. If you are assuming that Boeing's bid means more jobs here, then you're right. According to a study obtained by Marathon Pundit, a successful Boeing bid will lead to the creation of 62,000 to 70,000 new jobs. A winning Airbus/EADS/Northrop Grumman bid will also create American jobs, but not nearly as many--5,100 to 7,100.

Let me present the situation in a different manner. Boeing maintains 96 percent of its operating assets in the United States, whereas Airbus/EADS, in an amazing bit of symmetry, maintains 96 percent of its operating assets in Europe.

So...we're looking at two refueling jets. One that more closely matches the needs of our military and will lead to more American jobs, and another that falls short of those needs and will put far fewer Americans to work.

Let's pretend you are the secretary of defense: Which bid would you select?

Now tht it appears the KC-X project is a single-bidder deal, Boeing still faces a tough customer. SecDef Robert Gates tells Reuters, "We will certainly be sharpening our pencil when it comes to negotiating with Boeing."

As for charges of protectionism by Sarkozy, I say "non" to that.

There is some scuttlebutt that a Airbus/EADS/Northrop Grumman tanker bid might resurface. If it does, don't be shocked if Boeing still soars above its competition.

UPDATE 5:25pm CST: There are mulitple reports that Airbus/EADS/Northrop Grumman wants back in on the KC-X, which leads Sen. Sam Brownback (R-KS) to comment, "Delay is unacceptable. Dragging out this competition hurts our warfighters and costs the taxpayer. Changing deadlines would undermine the Department of Defense's effort to make this competition fair for all parties involved. We cannot have different sets of rules for foreign and domestic competitors. EADS can either choose to bid or not, but it should not expect the United States for help in entering the competition.

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