Mar 03 2008

Air Force tankers to be built in Mobile $35 billion contract may bring at least 1,500 jobs

Birmingham News

By Dawn Kent

Alabama is set to become just the third place in the world where giant jets are built, following an announcement Friday by the Air Force that will bring production of its next-generation aerial refueling tanker to Mobile, along with thousands of jobs expected to ripple across the region.

Northrop Grumman Corp. and the European Aeronautic Defence & Space Co., parent company of Airbus, beat out rival Boeing Co. for the $35 billion contract in a fierce, three-year battle waged on many fronts. The work could eventually be worth $100 billion. 

The news is a huge - and in many circles, surprising - coup for the state, because the Northrop Grumman-EADS team was widely considered an underdog to Boeing, a longtime darling of U.S. defense contracts.

Many analysts had given Boeing the edge in the competition to replace an aging fleet of KC-135 aircraft. Boeing could protest the decision, a process that could last up to a year.

Almost immediately Friday, state leaders began drawing comparisons between the tanker win and another watershed moment for Alabama that birthed a booming state automotive industry.

"Just like the initial decision for Mercedes-Benz in 1993 to locate in Tuscaloosa County, this sent a message to the world that Alabama is a great place to live, work and do business," U.S. Sen. Richard Shelby said late Friday afternoon, shortly after his flight touched down at the Birmingham International Airport and he heard the news.

`I hear screaming':

While Mobile is undoubtedly ground zero for Alabama's latest economic development prize, the tanker business is sure to be felt throughout the state, said Alabama Development Office Director Neal Wade.

Unlike the automotive industry before Mercedes-Benz, the aerospace industry already is strong, Wade said. The tanker work will push it to another level, and the global exposure should boost activity in other industry sectors, he said.

"It's going to help our efforts in aerospace, our efforts in automotive and all of our economic development efforts throughout the world," Wade said.

Wade heard the news while he was on the phone with someone in Gov. Bob Riley's office Friday afternoon, and she said, "I hear screaming."

A quick check confirmed that the contract had gone Alabama's way, setting off celebrations from Mobile to Montgomery to Washington, D.C.

None in Texas, however. The New York Times reported that the Air Force decision was so closely held that Sen. Kay Bailey Hutchison, R-Texas, issued a statement moments before the Pentagon announcement that mistakenly said Boeing had won the deal and would bring an estimated 3,000 jobs to Texas.

Jobs as carrots:

It's been an arduous three-year process to get to this point, as Riley, Shelby, Sen. Jeff Sessions and U.S. Rep. Jo Bonner, R-Mobile, helped the Northrop Grumman-EADS team promote its tanker, which was up against Boeing's KC-767.

The Boeing tanker was slated to be built in the Seattle area, now one of two places in the world where large aircraft are assembled. The other site is Toulouse, France, home of Airbus.

The companies faced off with extensive campaigns designed to sway decisionmakers, as they each announced job creation and economic impact estimates in various states if their respective tanker was chosen.

Before Friday's announcement, Alabama had won 1,500 jobs on paper, Wade said, referring to those directly tied to the military work.

"Today we won them for real," he said.

Along with those jobs, the contract win carries a bonus. Last month, EADS said it would build a commercial freighter in Mobile if it won the military work.

Supplier work also is expected to created thousands of jobs.

Wade said the state already has tight relationships with those companies and will immediately amp up efforts to bring them to Alabama, too.

Swaying the Air Force:

For Mobile, the tanker work is the second major economic development announcement in less than a year. Last May, German steelmaker ThyssenKrupp chose a site north of the city where it is building a $3.7 billion plant, Alabama's largest industrial prize ever.

In the tanker race, analysts had given Boeing the advantage with its smaller and lighter KC-767, which would take up less space on the ground and burn less fuel. But Northrop said its larger plane would be more efficient and able to carry more fuel, personnel and cargo.

The tanker is based on the Airbus A330 twin-engine jetliner.

In announcing the decision, Air Force officials said the winning tanker provided the best value to the government in five key factors: mission capability, proposal risk, past performance, cost price and integrated fleet aerial refueling rating.

The contract is worth $30 billion to $40 billion over 10 to 15 years and could be even more lucrative, since it is the first of three deals to replace the Air Force's entire fleet of nearly 600 tankers.

Despite Los Angeles-based Northrop Grumman's presence in the competition, as well as plans to assemble what will be called the KC-45 in Mobile, Chicago-based Boeing had singled out Northrop's partner as European, bringing national pride into the picture. 

That sentiment continued Friday following the announcement.

In a joint statement, Washington state's two senators and six of its nine House members said they were outraged by the choice of a European company "and its foreign workers" to provide a tanker to the U.S. military.

"This is a blow to the American aerospace industry, American workers and America's men and women in uniform ... We will be asking tough questions about the decision to outsource this contract," the statement read.