States jockey for EADS defense plant

Representatives from 35 states met this week at a Capitol Hill hotel to kick off a yearlong competition to house a European Aeronautic Defence and Space Co. (EADS) engineering center and production plant.

Paris-based EADS, one of the world’s largest defense companies, is making a play for the U.S. defense market, positioning itself as a prime competitor to Boeing, the dominant domestic aerospace company.

The ultimate prize is an Air Force contract to replace the service’s aging fleet of Boeing-made KC-135 aerial refueling tankers. Boeing won the bid in 2002 to lease replacement tankers to the Air Force, but the $23.5 billion deal fell apart last year when an ethics scandal surfaced. The Pentagon will likely reopen the program to competition later this year, pitting Boeing’s 767 tanker against EADS’s KC-330.

But to have any hope of claiming the contract, EADS must expand its U.S. presence and convince Congress and the Pentagon it can do most of the work on the airframes domestically. EADS already has a plant in Wichita, Kan., but it does work only on the company’s new Airbus A380 airframe.

“Any transport that’s going to be a credible competitor to Boeing is going to have to have a significant amount of U.S. value added,” said Jeff Bialos, deputy undersecretary of defense for industrial affairs in the Clinton administration. “I think EADS is shrewd for understanding and building its own industrial capabilities.”

The new EADS aircraft engineering center will employ roughly 150 people — mostly high-paid aerospace engineers — to work on the company’s A330, A340 and A350 platforms, said company spokesman Guy Hicks. Should it win the tanker contract, EADS plans to invest $600 million into a 1.5-million-square-foot facility that would employ at least 1,100 people.
Similar tactics have worked well recently for foreign companies, despite opposition from “Buy America” hawks on Capitol Hill.

Brazilian jet maker Embraer teamed up with Lockheed Martin for the Army’s pricey aerial common sensor program, ousting incumbent Northrop Grumman in August for the $8 billion deal. Embraer will build the jets at a new facility in Jacksonville, Fla.

And just last month, the Navy announced that Italian helicopter maker AgustaWestland will make the next presidential chopper at a plant in Owego, N.Y. The win was a significant upset over Sikorsky.

“The Marine One decision is an important precedent,” Bialos said. “It basically shows foreign competition is not disabling.”