bobdina
09-05-2009, 11:11 PM
Airbus Subsidies Ruled Illegal; U.S. Lawmakers Pounce
By william matthews
Published: 4 Sep 2009 16:48
Airbus, the company that won - and then lost - a $35 billion contract to build refueling tankers for the U.S. Air Force last year, got more bad news Sept. 4. The World Trade Organization upheld U.S. complaints that Airbus received illegal subsidies from four European countries.
The KC-45 tanker won a contract in February 2008 to build 179 planes for the U.S. Air Force, but Boeing challenged the award and the GAO overturned it four months later. (Northrop Grumman)
The finding, which came in a 1,000-page interim report, is sure to become a bludgeon when Airbus and its arch-rival, Boeing, clash again over a tanker contract in 2010.
"Today's news further demonstrates that the French tanker should hae been disqualified because of illegal subsidies," Rep. Todd Tiahrt, R-Kan.
"We need an American tanker built by an American company with American workers," Tiahrt said.
Boeing aircraft built in Washington are militarized for service as tankers in Kansas.
Rep. Norm Dicks, D-Wash., said "the U.S. government cannot reward illegal market actions that have harmed U.S. manufacturers and stolen U.S. aerospace jobs."
Dicks said "the tanker contract must be awarded on the basis of a level playing field," and means factoring the value of the subsidies into Airbus's cost.
Boeing supporters in Congress have long complained that European subsidies helped reduce the cost of Airbus planes, giving them an unfair advantage in the competition against Boeing.
And Airbus has charged that Boeing benefits from U.S. government and state subsidies.
In a statement, Northrop said that "WTO cases are irrelevant to U.S. defense acquisition."
The Defense Department has resisted getting embroiled in the subsidy dispute, but Congress included a provision in the 2009 Defense Authorization Act that may make it difficult to continue to dodge.
A House-passed version would have required the Defense Department to determine whether illegal subsidies made the tanker competition unfair, and if so, to take steps to balance them.
The Senate toned down that provision, instead requiring the department to simply review the "potential impact" of the subsidies and report its findings along with "any recommendations the secretary considers appropriate."
Dicks said the subsidies, which are referred to as "launch aid," have "caused material harm" to Boeing. The aircraft maker has lost 20 percent of its market share, Dicks said. That cost tens of thousands of workers their jobs and cost Boeing hundreds of billions of dollars, he said.
In a complaint filed in 2004, the U.S. government said that for decades, Airbus received illegal subsidies worth more than $200 billion from the governments of France, Germany, Spain and Britain.
Airbus and its parent company EADS filed a counter subsidy complaint against the United States, charging that Boeing has benefited from "massive subsidies" provide by state and federal governments, $22 billion from NASA and the departments of Defense and Commerce.
An interim WTO ruling on the European complaint is expected in 2010.
With the complaints pending, the Air Force tanker competition got underway in 2005.
EADS teamed with Northrop Grumman to offer the Air Force refueling tankers based on Airbus A330 airliners. Boeing offered a tanker based on its 767 aircraft.
The Airbus plane won a contract in February 2008 to build 179 planes, but Boeing promptly challenged the award and the Government Accountability Office overturned it four months later.
The Air Force is expected to release a draft request for proposals this month to start the tanker competition over again.
The WTO ruling "can't be a good thing for the Northrop-EADS gang," said Christopher Hellman, a military policy and budget analyst.
"Whether it will be enough to tip the balance in favor of Boeing, I don't know. At the very least it will make it easier to argue for splitting" the buy so that Boeing gets at least half, Hellman said.
Rep. John Murtha, D-Pa., chairman of the House Appropriations defense subcommittee, argued earlier this year for a split tanker buy, but Defense Secretary Robert Gates strongly opposed the idea. By summer, Murtha was persuaded to leave the matter up to Gates.
A tanker battle in Congress seems unavoidable.
"There's a practical political problem here," said Loren Thompson, a defense analyst at the Lexington Institute. "A handful of committed legislators can throw a monkey wrench into the source-selection process."
Some lawmakers will undoubtedly want to use the WTO ruling to prevent the Air Force from buying Airbus tankers, Thompson said. "And in our system, the people who want to stop something usually have more power" than those trying to move forward.
http://www.defensenews.com/story.php?i=4265981&c=EUR&s=AIR
By william matthews
Published: 4 Sep 2009 16:48
Airbus, the company that won - and then lost - a $35 billion contract to build refueling tankers for the U.S. Air Force last year, got more bad news Sept. 4. The World Trade Organization upheld U.S. complaints that Airbus received illegal subsidies from four European countries.
The KC-45 tanker won a contract in February 2008 to build 179 planes for the U.S. Air Force, but Boeing challenged the award and the GAO overturned it four months later. (Northrop Grumman)
The finding, which came in a 1,000-page interim report, is sure to become a bludgeon when Airbus and its arch-rival, Boeing, clash again over a tanker contract in 2010.
"Today's news further demonstrates that the French tanker should hae been disqualified because of illegal subsidies," Rep. Todd Tiahrt, R-Kan.
"We need an American tanker built by an American company with American workers," Tiahrt said.
Boeing aircraft built in Washington are militarized for service as tankers in Kansas.
Rep. Norm Dicks, D-Wash., said "the U.S. government cannot reward illegal market actions that have harmed U.S. manufacturers and stolen U.S. aerospace jobs."
Dicks said "the tanker contract must be awarded on the basis of a level playing field," and means factoring the value of the subsidies into Airbus's cost.
Boeing supporters in Congress have long complained that European subsidies helped reduce the cost of Airbus planes, giving them an unfair advantage in the competition against Boeing.
And Airbus has charged that Boeing benefits from U.S. government and state subsidies.
In a statement, Northrop said that "WTO cases are irrelevant to U.S. defense acquisition."
The Defense Department has resisted getting embroiled in the subsidy dispute, but Congress included a provision in the 2009 Defense Authorization Act that may make it difficult to continue to dodge.
A House-passed version would have required the Defense Department to determine whether illegal subsidies made the tanker competition unfair, and if so, to take steps to balance them.
The Senate toned down that provision, instead requiring the department to simply review the "potential impact" of the subsidies and report its findings along with "any recommendations the secretary considers appropriate."
Dicks said the subsidies, which are referred to as "launch aid," have "caused material harm" to Boeing. The aircraft maker has lost 20 percent of its market share, Dicks said. That cost tens of thousands of workers their jobs and cost Boeing hundreds of billions of dollars, he said.
In a complaint filed in 2004, the U.S. government said that for decades, Airbus received illegal subsidies worth more than $200 billion from the governments of France, Germany, Spain and Britain.
Airbus and its parent company EADS filed a counter subsidy complaint against the United States, charging that Boeing has benefited from "massive subsidies" provide by state and federal governments, $22 billion from NASA and the departments of Defense and Commerce.
An interim WTO ruling on the European complaint is expected in 2010.
With the complaints pending, the Air Force tanker competition got underway in 2005.
EADS teamed with Northrop Grumman to offer the Air Force refueling tankers based on Airbus A330 airliners. Boeing offered a tanker based on its 767 aircraft.
The Airbus plane won a contract in February 2008 to build 179 planes, but Boeing promptly challenged the award and the Government Accountability Office overturned it four months later.
The Air Force is expected to release a draft request for proposals this month to start the tanker competition over again.
The WTO ruling "can't be a good thing for the Northrop-EADS gang," said Christopher Hellman, a military policy and budget analyst.
"Whether it will be enough to tip the balance in favor of Boeing, I don't know. At the very least it will make it easier to argue for splitting" the buy so that Boeing gets at least half, Hellman said.
Rep. John Murtha, D-Pa., chairman of the House Appropriations defense subcommittee, argued earlier this year for a split tanker buy, but Defense Secretary Robert Gates strongly opposed the idea. By summer, Murtha was persuaded to leave the matter up to Gates.
A tanker battle in Congress seems unavoidable.
"There's a practical political problem here," said Loren Thompson, a defense analyst at the Lexington Institute. "A handful of committed legislators can throw a monkey wrench into the source-selection process."
Some lawmakers will undoubtedly want to use the WTO ruling to prevent the Air Force from buying Airbus tankers, Thompson said. "And in our system, the people who want to stop something usually have more power" than those trying to move forward.
http://www.defensenews.com/story.php?i=4265981&c=EUR&s=AIR