By Andrea Shalal-Esa
WASHINGTON, April 15 (Reuters) - Airbus parent EADS is looking for a new U.S. partner after L-3 Communications Holdings Inc backed away from joining a potential bid for a U.S. refueling plane deal valued at up to $50 billion, people familiar with the situation said.
EADS officials had hoped to announce this week that they would challenge Boeing Co in a rematch. But its efforts to assemble a new team after Northrop Grumman Corp withdrew last month have run into difficulty.
Political opposition also mounted. Norm Dicks, a Democrat congressman from Washington, where Boeing would manufacture many of its tankers, said industrial base concerns outweighed the benefits of competition.
'Personally, I hope they don't bid,' Dicks, chairman of the House of Representatives Defense Appropriations subcommittee, told reporters on Thursday. 'We've already had a competition. We know what their numbers are. I think that their plane's too big.'
Asked whether it would be a mistake for a U.S.-based contractor to join EADS in a bid, Dicks replied, 'That's a decision they have to make.
Several people following the matter said Dicks had taken a strong interest in EADS' talks with possible suppliers, and had personally been in touch with some industry executives.
EADS and Northrop won a previous U.S. Air Force tanker contest in 2008. The Pentagon canceled that deal after government auditors upheld a Boeing protest.
EADS officials are still in talks with some U.S. companies, including possibly L-3 and Raytheon Co, although time for sealing a pact is running out, according to several sources who were not authorized to speak on the record.
The company hopes to make an announcement next week, according to sources following the issue.
Pentagon officials last month said they would extend the bid deadline 60 days if EADS committed to compete, and said they expected a decision within a few weeks.
EADS SEEN CLOSE TO A DECISION
EADS was on the verge of deciding whether to compete, Deputy Defense Secretary William Lynn said.
The Pentagon needs to know EADS' decision 'sufficiently ahead' of May 10, the current bid deadline, he told a luncheon session hosted by the Aerospace Industries Association, the arms industry's chief trade and lobbying group.
Jim Albaugh, who heads Boeing's commercial airliner business, told the session that Boeing had developed its planes the 'old-fashioned way' and expected not to be penalized as a result in any competition with its arch-rival Airbus, a Toulouse, France-based EADS unit.
By contrast, he said the World Trade Organization had concluded recently, in a case brought by the U.S. government, that Airbus had benefited from 'hundreds of billions of dollars' in illegal European subsidies.
EADS spokesman Guy Hicks said only that EADS was continuing to evaluate its options and no decision had been made.
'EADS North America has made no decision to bid for the KC-X contract. If we elect to go forward, we will do so with a strong U.S. industrial team,' he said. Hicks said the Pentagon's agreement to give EADS more time to prepare a bid was important, but not the only factor guiding the decision.
L-3 spokesman Jennifer Barton declined to comment.
Raytheon earlier this month said it was not joining the EADS team, but officials could not be reached for further comment on Thursday. Sources familiar with the talks also said BAE Systems had ruled out joining the EADS team.
POLITICALLY INCENDIARY SITUATION
Scott Hamilton, an analyst with Leeham Co, said EADS' potential suppliers had to weigh the intense political climate against any possible gain if EADS once again beat out Boeing.
'Clearly this is a politically incendiary situation,' he said, citing mounting opposition among Boeing supporters. Any potential supplier could face 'intense political pressure and intense congressional wrath,' he said.
When Northrop withdrew, it said the Pentagon's rules for the competition favored Boeing's smaller 767-based tanker, although Northrop and EADS supporters insist the A330-based tanker would give the U.S. Air Force more flexibility and range in carrying fuel, passengers and cargo.
(Reporting by Andrea Shalal-Esa; Additional reporting by Jim Wolf and Tim Hepher in Paris; Editing by Tim Dobbyn and Robert MacMillan) Keywords: USA TANKER/EADS (andrea.shalal-esa@thomsonreuters.com; + 1 202 898 8400, washington.newsroom@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, April 15 (Reuters) - Airbus parent EADS is looking for a new U.S. partner after L-3 Communications Holdings Inc backed away from joining a potential bid for a U.S. refueling plane deal valued at up to $50 billion, people familiar with the situation said.
EADS officials had hoped to announce this week that they would challenge Boeing Co in a rematch. But its efforts to assemble a new team after Northrop Grumman Corp withdrew last month have run into difficulty.
Political opposition also mounted. Norm Dicks, a Democrat congressman from Washington, where Boeing would manufacture many of its tankers, said industrial base concerns outweighed the benefits of competition.
'Personally, I hope they don't bid,' Dicks, chairman of the House of Representatives Defense Appropriations subcommittee, told reporters on Thursday. 'We've already had a competition. We know what their numbers are. I think that their plane's too big.'
Asked whether it would be a mistake for a U.S.-based contractor to join EADS in a bid, Dicks replied, 'That's a decision they have to make.
Several people following the matter said Dicks had taken a strong interest in EADS' talks with possible suppliers, and had personally been in touch with some industry executives.
EADS and Northrop won a previous U.S. Air Force tanker contest in 2008. The Pentagon canceled that deal after government auditors upheld a Boeing protest.
EADS officials are still in talks with some U.S. companies, including possibly L-3 and Raytheon Co, although time for sealing a pact is running out, according to several sources who were not authorized to speak on the record.
The company hopes to make an announcement next week, according to sources following the issue.
Pentagon officials last month said they would extend the bid deadline 60 days if EADS committed to compete, and said they expected a decision within a few weeks.
EADS SEEN CLOSE TO A DECISION
EADS was on the verge of deciding whether to compete, Deputy Defense Secretary William Lynn said.
The Pentagon needs to know EADS' decision 'sufficiently ahead' of May 10, the current bid deadline, he told a luncheon session hosted by the Aerospace Industries Association, the arms industry's chief trade and lobbying group.
Jim Albaugh, who heads Boeing's commercial airliner business, told the session that Boeing had developed its planes the 'old-fashioned way' and expected not to be penalized as a result in any competition with its arch-rival Airbus, a Toulouse, France-based EADS unit.
By contrast, he said the World Trade Organization had concluded recently, in a case brought by the U.S. government, that Airbus had benefited from 'hundreds of billions of dollars' in illegal European subsidies.
EADS spokesman Guy Hicks said only that EADS was continuing to evaluate its options and no decision had been made.
'EADS North America has made no decision to bid for the KC-X contract. If we elect to go forward, we will do so with a strong U.S. industrial team,' he said. Hicks said the Pentagon's agreement to give EADS more time to prepare a bid was important, but not the only factor guiding the decision.
L-3 spokesman Jennifer Barton declined to comment.
Raytheon earlier this month said it was not joining the EADS team, but officials could not be reached for further comment on Thursday. Sources familiar with the talks also said BAE Systems had ruled out joining the EADS team.
POLITICALLY INCENDIARY SITUATION
Scott Hamilton, an analyst with Leeham Co, said EADS' potential suppliers had to weigh the intense political climate against any possible gain if EADS once again beat out Boeing.
'Clearly this is a politically incendiary situation,' he said, citing mounting opposition among Boeing supporters. Any potential supplier could face 'intense political pressure and intense congressional wrath,' he said.
When Northrop withdrew, it said the Pentagon's rules for the competition favored Boeing's smaller 767-based tanker, although Northrop and EADS supporters insist the A330-based tanker would give the U.S. Air Force more flexibility and range in carrying fuel, passengers and cargo.
(Reporting by Andrea Shalal-Esa; Additional reporting by Jim Wolf and Tim Hepher in Paris; Editing by Tim Dobbyn and Robert MacMillan) Keywords: USA TANKER/EADS (andrea.shalal-esa@thomsonreuters.com; + 1 202 898 8400, washington.newsroom@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.