Tanker: Northrop Grumblin’ probably won’t bid

Northrop Grumman has “made a tentative decision” not to bid on the U.S. Air Force’s tanker contract, according to the analyst most-knowledgeable about the Pentagon’s long-running procurement saga.

The problem, writes Loren Thompson of the Lexington Institute: their plane won’t fit, so they’ll have to quit.

EADS and Northrop Grumblin’ are offering a plane that’s significantly bigger than the KC-135s the Air Force flies now. Boeing, on the other hand, is offering a 767-derivative that could use the taxiways and fit inside the hangers already built for the KC-135s.

“When Northrop first entered the tanker contest, it hoped to convince the Air Force that a big plane with more range and carrying capacity was better suited to future refueling needs,” Thompson wrote this week. And when EADS won the last round of bidding, it did so largely because the Pentagon gave the two companies extra credit for having the extra size.

But this time around, the Pentagon isn’t giving that extra credit, and is putting more emphasis on cost as well. That hurts the EADS/Northrop bid because “the modified Airbus A330 that Northrop planned to offer is much more expensive than the 767 competitor Boeing plans to bid,” Thompsen said. “If both teams have to satisfy all 373 requirements and there is no extra credit for longer range or bigger fuel carriage, then price becomes crucial.”

Given that, Northrop’s new CEO, Wesley Bush, has pretty much made up his mind that it’s not worth it to pursue the tanker contract, Thompson said. Bush has “a mandate from his board to run a tight ship even if it means passing up big revenues because (profits) are too hard to quantify. That latter description certainly fits the tanker solicitation.”

A Northrop Grumman spokesman didn’t confirm Thompson’s account, but he certainly didn’t deny it either, saying the company was waiting to see the Air Force’s final request before making a decision.

But “without meaningful changes,” the spokesman grumbled, the Pentagon’s proposal “is not (one) to which Northrop Grumman can respond.”

It marks a stunning reversal of fortune for the EADS/Northrop team, Thompson notes. Certainly Airbus fans in Alabama seemed shocked. Mobile Press-Register political editor George Talbot called it “a heartbreak for Mobile, which could see its shot at a $600 million aircraft assembly plant vanish in the Mobile Bay breeze.”

And in Wales — where much of the wings fabrication work for A330s is done — local leaders are worried about the impact of losing the work, which would be worth just about $8 billion.

Sen. Richard Shelby (R-Airbus) called the Pentagon bidding process “a sham” and declared that the Obama administration had decided to slant the competition in Boeing’s favor — not because the Boeing plane is more affordable and better suited to the mission at hand — but because the president is from Chicago, and so is Boeing’s headquarters.

“Remember where they’re from,” Shelby told a pro-Airbus audience in Mobile.

All this is certainly good news for Boeing, and for the skilled and experienced District 751 workers who would build the tankers in Everett. (As opposed to the yet-to-be-trained workers who would assemble Airbus parts shipped from France in a not-yet-built factory run by a never-before-tried joint venture under the EADS/Northrop plan.)

Or is it? Thompson warned that Boeing could face a political backlash if Northrop fails to bid, and either Congress or the Pentagon views Boeing’s subsequent bid as being too high.

“So what looks like a windfall could easily become a trap,” Thompson warned. “Boeing execs will have to think through how to assure the program is profitable without getting more controversy in the bargain.”

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