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EADS – STRUGGLES TO PLEASE!

EADS – STRUGGLES TO PLEASE!
By Howard Wheeldon

09 Mar 10. *“The Lord Giveth and the Lord Taketh Away” – tongue in cheek maybe but is this the best way to describe the on/off first phase of the US KCX tanker program that has [so far] lasted no less than nine years without a single aircraft yet being officially ordered? Probably it is absolutely perfect! Nevertheless, after warnings aplenty and for all the right reasons it seems that EADS and partner Northrop Grumman have decided that enough is enough and that they will after all walk away from the first 179 airplane phase of the KCX program competition on the basis that the RFP is so heavily biased in favour of Boeing.

What was originally intended and probably remains as a program that spread over twenty five years may total five hundred aircraft worth maybe as much or more than $35bn is fast heading toward being regarded as one if not the worst ever US defence procurement competitions. Now for Europe’s principle aerospace manufacturer and its US partner Northrop Grumman the KCX task is over. Throwing in the towel on a huge defense competition like this and one that would, had EADS and its partner won, mean that for the first time Airbus aircraft actually being built in the US with all the inherent benefits that would bring to all concerned except perhaps Boeing was certainly not easy. But as a European manufacturer there is little use doubting that no matter who it paired with as the principle domestic partner – in this case Northrop Grumman – the thought of Airbus aircraft being built in the US was clearly never going to be one that appealed politically or of course to the main domestic competitor Boeing. Pity really but there you are – just as many had feared it seems that despite all those wonderful political gestures in countries such as the US that had appealed for common sense to ensure that protectionism should never be allowed to take hold we may just have found an example of what may be about to come in the back yard of the major anti protectionism proponent. Whatever and be that right or plain wrong in terms of the example questioned here be under no illusion that in some nations of the world protectionism is not only alive and well but it is positively thriving as well!

True, I can hear you saying that it was EADS/Northrop that decided to pull away from competing in the revived KCX competition – their choice meaning they could after all have stayed in! True indeed, they could have stayed in but at what expense and at what level of reasonable expectation that for all the effort required they might after all win? Not much I venture to suggest no matter how good or bad the plane involved and no matter whether it might or might not have been the best for the overall tanker mission. We will never know of course but bear in mind that staying in and going through the full motions would have been at a likely massive cost for an almost certain zero reward! Given the circumstances, given the lack of level playing field in the modified RFP meaning given the manner in which the revised program was so very clearly different to the one that less than two years ago EADS and its US based partner Northrop Grumman had won, given quite natural and understandable fears that with previously open doors now being slammed in the face of international competitors what else would anyone likely do but conclude that if protectionism as opposed to free, open and fair competition was now the rule of thumb it must be time to walk away.

As to the rest of the EADS issue today – the small matter of FY09 results and the quite appalling EUR763m loss perhaps the best that can be said is that the 2009 result probably marked just about the lowest point in EADS performance in terms of specific programs. True, EADS is still far from being a perfect company and it will no doubt remain one that I continue to have reservations for a few more years yet. Certainly EADS will be carrying the can

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