Manufacturing News: Boeing-Northrup Grumman Battle for New Fuel Plane Shows Complexities of Offshore Manufacturing Issue

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- March 10, 2008 -

Manufacturing News: Boeing-Northrup Grumman Battle for New Fuel Plane Shows Complexities of Offshore Manufacturing Issue

Should Foreign Company Play Key Role in Building US Military Plane? What if they Plan to Make it in Alabama? Boeing also Went Global with Dreamliner Approach

SCDigest Editorial Staff

SCDigest Says:

EADS has committed to performing final assembly of its systems for the aircraft in Alabama, creating many hundreds of jobs there. Naturally, Alabama officials are strongly in favor of the award being given to Northrup Grumman.

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The complex threads of the debate around offshoring have recently taken another turn as a result of Northrup Grumman’s surprise win of a $40 billion contract to build the next generation of aerial refueling tankers. It was the largest contract in US Air Force history.

The award comes at the end of a multi-year saga, in which Boeing basically had the deal won only to see it re-opened for bid as the result of a serious procurement scandal.

To the surprise of many, a team led by Northrup Grumman in partnership with a division related to Europe’s Airbus (Boeing’s top competitor) was awarded the deal by the Air Force last week – or maybe not.

Not surprisingly, Boeing and its political allies, such as politicians in Washington state where much of Boeing’s manufacturing would be done for the plane, are turning up the heat – and using the offshoring angle as the fuel for the fire.

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Two “Angles of Attack”

Boeing said it will file a formal protest on Tuesday asking the Government Accountability Office to review the Air Force's decision to give the contract to Northrop and European Aeronautic Defence & Space Co (EADS). Much of Boeing’s formal complaint is likely to focus on the merits of the decision based on the specifics of its technical and cost proposal – letting others focus on the offshoring angle.

Those arguments take two lines:

The US should not entrust so much of a critical US military aircraft to a foreign supplier – even if that supplier operates in a friendly European US ally countries.
As a result of the “outsourcing partnership,” the US will lose jobs versus what would have been created in the US had Boeing won the deal – and the Pentagon shouldn’t be giving away US jobs.

Presidential candidate Barak Obama, for example, said it was hard for him to believe “that having an American company that has been a traditional source of aeronautic excellence would not have done this job.” Hillary Clinton said she was “deeply concerned” about the Pentagon decision to award the contract “to a team that includes a European firm that our government is simultaneously suing at the WTO for receiving illegal subsidies.” Republican John McCain was a key figure in uncovering the original procurement scandal, in which a Pentagon official went to jail, and Boeing was barred for a time from any new DoD contracts.

Many other politicians spoke in even stronger terms about their opposition to the EADS role. With 2008 a major election year, this debate is likely to continue strongly for many months.

But the issue is complex. EADS has committed to performing final assembly of its systems for the aircraft in Alabama, creating many hundreds of jobs there. Naturally, Alabama officials are strongly in favor of the award being given to Northrup Grumman.

And Boeing itself used a new approach to production for its 787 Dreamliner passenger aircraft that made wide use of offshore design and assembly from companies around the globe – only to find it had trouble managing the effort, leading to $2 billion in expediting costs and substantial delays in the plane’s scheduled delivery dates.

What’s your take on this debate? Is it wrong to give a major US military contract to a team that includes a foreign manufacturer – or is this just a lot of hot air? Let us know your thoughts at the Feedback button below.