By Roxana Tiron - 05/25/10 07:40 PM EDT
Boeing is painting its rival, EADS North America, as a potential security threat in the competition to win a $35 billion Air Force tanker aircraft.
The American aircraft maker pointed Tuesday to an attempted sale of helicopters to Iran by its rival’s Franco-German parent in 2005, and to the fact that the European manufacturer is not subject to the Foreign Corrupt Practices Act.
EADS North America is a wholly owned subsidiary of the European aerospace and defense conglomerate EADS NV with headquarters in Germany and France. The governments of France, Germany and Spain all hold stake in the conglomerate.
Sean O’Keefe, the CEO of EADS North America, said his company has all the security arrangements to handle the sensitive and classified technologies.
But Boeing is distributing literature on Capitol Hill singling out EADS NV as not having to abide by U.S. laws on corporate integrity, and for trying to market its wares to Tehran. EADS North America is subject to the Foreign Corrupt Practices Act.
The laminated, pocketbook-sized handouts Boeing is giving to lawmakers also claim that for reasons of national security, the United States has never bought a critical military system from a foreign-owned or -controlled company.
This is not the first time Boeing or its congressional supporters have tried to make the case that awarding the contract to EADS could represent a national-security threat. The Hill reported in 2008 that Boeing and its congressional supporters, such as Rep. Todd Tiahrt (R-Kan.), used a classified CIA briefing on questionable business practices in an effort to discredit the company’s rival.
EADS North America was partnered with U.S. defense giant Northrop Grumman for the tanker contract at the time. After Boeing successfully overturned the tanker contract awarded to Northrop and EADS in 2008, Northrop Grumman bowed out of the new tanker competition earlier this year. EADS North America announced it would continue in the competition as the sole bidder.
Now Boeing officials are raising concerns that the European parent company still calls the shots for its North America subsidiary and would have input in the Air Force tanker contract, because parts of it would be built in Europe and then assembled in Mobile, Ala.
Boeing took aim at Europe’s EADS for trying to do business with Iran, citing a previous effort to market its technologies at a Tehran air show.
“The parent company of EADS continues to do business with countries that are not friends to the United States,” said Timothy Keating, Boeing’s vice president of government operations. “In terms of national-security concerns, we better ensure there are strict firewalls between EADS North America and EADS of Europe.”
Boeing officials are also fanning concerns that in a crisis situation, the U.S. government would have less leverage to compel EADS to continue building the tanker or supplying parts for the tankers over the years.
“In the past, foreign governments have not agreed with U.S. policy and then withheld material goods and support,” Keating said.
Pentagon officials have said they wanted to see competition for the tanker contract from qualified bidders. They agreed to extend the deadline for submitting bids to allow EADS to compete.
"We would not have welcomed EADS North America's participation in this important competition unless they were a company in good standing with the Department of Defense," said Pentagon press secretary Geoff Morrell.
Boeing itself has been tarnished during the Air Force’s search for
replacement tankers in the past decade. The Air Force
opened competition for the lucrative tanker after two Boeing officials
were jailed for striking a corrupt leasing deal for tankers more than
six years ago.
EADS North America officials on Tuesday struck back at the fresh national security allegations made by Boeing.
“Boeing’s ongoing misinformation campaign is an attempt to make this competition about anything other than getting the best tanker for the Air Force,” said James Darcy, EADS North America’s director of corporate communications. “We’re proud that the Department of Defense has previously selected us as a trusted U.S. prime contractor, and we’re proud of the 48,000 Americans on our tanker team who will build the KC-45.”
Boeing has galvanized its congressional supporters in recent months and is lobbying to pass legislation that would compel the Pentagon to take into account a dispute before the World Trade Organization (WTO) regarding illegal government subsidies to Airbus, which is owned by EADS. Airbus builds the A330 that EADS is offering in a modified version for the U.S. tanker contract.
And tucked into the House’s draft of the war emergency supplemental is language that would require the secretary of Defense to perform an assessment for all major defense contracts under competition this year or in fiscal 2011 to determine whether the costs are realistic and reasonable. The defense chief also has to provide an assessment to Congress of how many U.S. jobs are created or lost as part of those contract proposals.
The language in the draft supplemental was written by Reps. David Obey (D-Wis.) and Norm Dicks (D-Wash.), a key Boeing supporter, with the tanker competition in mind.
Boeing and EADS North America have been at loggerheads over how many U.S. jobs each company would create if it won the tanker contract. The defense companies also have been arguing over whether the Pentagon should take into account the WTO’s finding that European governments have helped Airbus with launch money for its products. The European Union has to appeal the case and the WTO has to recommend the remedies the United States should take after the whole process is finalized.
The EU also has a suit against the United States claiming Boeing received about $24 billion in subsidies and tax breaks from Washington state over the past two decades, plus non-repayable benefits from military and space contracts. The WTO has not yet issued its preliminary ruling in that case.
-- This article was updated at 6:04 p.m.