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<< Previous   of   Next >>   ADVERTISEMENT   Related Stories • GAO sustains Boeing's protest of Air Force tanker award 6/18/08   CONTACT THE HERALD Robert Frank, City Editor frank@heraldnet.com   Published: Saturday, March 1, 2008 Boeing feels the sting of too many mistakes Company stunned to lose out on tanker By Michelle Dunlop, Herald Writer EVERETT -- "How could this happen?" The handwritten sign captured the feelings of the men and women who make the Boeing Co.'s 767 jets as they rallied near the company's factory in Everett. Boeing machinists and engineers gathered in the rain Friday afternoon to express their disgust over the U.S. Air Force's decision to award Northrop Grumman and Airbus parent EADS a $35 billion contract for aerial refueling tankers. Boeing, which had been the favorite for the deal, could protest the Air Force's decision. "We don't understand. We believe we make the best products," said Alan Rice, a Boeing engineer. Rice began his career at the company 30 years ago on the 767, which has a questionable future as a result of the Air Force's decision. The implications of Boeing's loss -- for both the company and the local economy -- were still too much for Rice to grasp fully when he showed up at the Machinists' hall displaying a sign that read, "I can not believe it." Boeing officials said they were "very disappointed" with the decision but would wait until the Air Force provides the company with more details before deciding their course of action. From Boeing workers to industry analysts, from company officials to Washington politicians, shock was a typical reaction to the news that Boeing lost the opportunity to supply the Air Force with 179 of its KC-767 jets. While the decision came after the stock market close, Boeing shares were punished in after-hours trading, falling $2.64 to $80.15. Northrop shares increased 22 cents to $78.83. Washington's Congressional delegation suggested the decision would be hard-fought in Congress. "We are outraged that this decision taps European Airbus and its foreign workers to provide a tanker to our American military," the state's delegation said in joint statement. "This is a blow to the American aerospace industry, American workers and America's men and women in uniform." As disbelief and anger began to subside, a common question arose: Why did Boeing lose? "In the end, the Air Force had to decide if they wanted a strictly aerial refueling aircraft (the KC-767) or a multi-role tanker transport like the KC-30," said Scott Hamilton, a local analyst with the Leeham Co. Boeing's smaller aircraft is geared more toward just carrying jet fuel while Northrop-EADS's larger KC-30 can haul more cargo and passengers. Chicago-based Boeing has touted its KC-767 as "the right-sized" tanker. But that's not what Air Mobility Commander Gen. Arthur Lichte said as he briefed the media on the Air Force's decision. When asked if the KC-30's larger size factored into the decision, Lichte said, "from a war-fighter's perspective, and I know the team looked at a whole number of things, but from my perspective, I can sum it up in one word: more." The KC-30 tanker allows for more passengers, cargo, fuel to offload, patients to be carried, "more availability, more flexibility and more dependability," Lichte said. The Air Force weighed several factors, including both the cost and mission capability of the competing tankers, as well as the past performance of the rival defense contractors. "Overall, Northrop Grumman did have strong areas in aerial refueling and in airlift, as well as their past performance was excellent and they offered great advantage to the government in cost price," said Sue Payton, assistant secretary of defense. Boeing had supplied the Air Force with its fleet of KC-135 Stratotankers, delivered between 1957 and 1965. Its experience building tankers had been thought to be an advantage in the competition. However, Boeing has fumbled some defense contracts, and its history building 767-based tankers for the governments of other countries is less than stellar. Boeing is several years late in delivering KC-767s to Japan and Italy. "They screwed that up royally," analyst Hamilton said. Northrop, which has not delivered a tanker, has lately won several competitions to supply foreign countries with tankers. Boeing officials testified in Congress just this past week on the company's delayed, and still not fully functional, "virtual fence" project proposed to secure the porous border between the U.S. and Mexico. The company similarly stumbled with its Renton-based "Wedgetail" program. All three issues could have factored into the Air Force's decision, Hamilton said. And then there's Boeing's blemished history on the refueling tanker contract. Following the terrorist attacks of Sept. 11, 2001, Boeing was awarded a deal to lease 767-based tankers to the Air Force. Arizona Sen. John McCain, the frontrunner for the Republican presidential ticket, denounced the lack of open competition in the Air Force's bidding process, calling it "one of the great rip-offs in the history of the United States of America." The government ultimately dissolved the deal with Boeing after it discovered Boeing had tainted the bid process. The scandal forced the resignation of Boeing's chief executive and chief financial officer and sent a Pentagon weapons buyer to prison. On Friday, Payton said Boeing's past scandal was not a factor in the decision. By the time the Air Force started its tanker search again, in 2006, Los Angeles-based Northrop had teamed up with Airbus' parent, European Aeronautic Defence and Space Co., to propose a tanker based off Airbus' commercial A330. They'll build their KC-30 in Mobile, Ala. The pair considered dropping out of the competition last year because they feared the Air Force's criteria for judging the bids favored Boeing. Air Force officials emphasized the transparency of the process, partly in hopes of discouraging a protest. The agency says a protest could delay tanker delivery as much as 18 to 24 months. Northrop reiterated the agency's comments. "Clearly the U.S. Air Force conducted a thorough and transparent competition in choosing their new tanker, which resulted in selection of the aircraft that best meets their current and future requirements," said Gary Ervin, with Northrop's integrated systems sector. That wasn't how Boeing's engineers and machinists interpreted the decision. "The Air Force awarded a contract for a U.S. military plane to a company that isn't American," said Grace Holland, 44, who works in materials management for Boeing. "It's a slap in the face. I have a son in the Air Force and to think that he might be working on a foreign plane -- that doesn't make me feel good." Herald reporter David Chircop contributed to this story. Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.

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