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US AIR FORCE URGES EUROPEAN ACCESS FOR US CONTRACTS

09 Jun 04. The FT reported today that the US Air Force secretary has called for European defence contractors to get more access to Pentagon contracts to stimulate stiffer competition in the US domestic aerospace industry.

James Roche, who controls a $90bn annual budget, warned that consolidation among US contractors in the 1990s had left Washington overdependent on a small number of key suppliers in certain sectors.

He said the main way to correct this was to encourage overseas manufacturers to compete for defence department spending. “I have always wanted to have a situation where you take this transatlantic thing seriously,” Mr Roche said in an interview. “It’s the only way we’re going to discipline the big airframe makers in the United States.” His comments come amid a scandal around Boeing’s $23.5bn leasing deal for a hundred 767 refuelling tankers, where air force officials have been accused of giving the US aerospace group an unfair advantage over European rival EADS, parent of Airbus. A series of investigations has held up the contract for more than a year, and Mr Roche said he did not expect Donald Rumsfeld, defence secretary, to make a decision until January.

But Mr Roche added that if the contract were reopened, he would encourage EADS to compete, especially after its recent victories over Boeing in tanker competitions in the UK and Australia.

“I don’t care if the planes are made by Martians,” he said. “Airbus was not prepared before; now they are.” One option, Mr Roche said, was to delay the tanker deal for about five years in favour of short-term fixes on existing aircraft. In that case, he estimated, EADS’s smaller contracts worldwide could make it a more experienced tanker supplier than Boeing. Mr Roche’s push comes despite recent political pressure to restrict foreign participation in defence contracts to protect US manufacturing jobs and punish reluctant allies in Europe. He conceded that political differences over Iraq could make co-operation more difficult in the short term, but said it was in the long term interests of the US to encourage innovation and push down prices by competition.

Although moves to direct more contracts to European companies would face considerable political hurdles, they could bode well for several high-profile competitions involving European companies. Foremost among them is a contest between Anglo-Italian helicopter maker AugustaWestland and Sikorsky of the US for a $1.6bn deal to build Marine One, a new presidential helicopter. That decision will be made by the US Navy, not the air force.

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