NEW YORK–Europe’s largest aerospace firm is switching gears to pursue acquisition of a U.S. company in the wake of a foiled attempt to gain a foothold in the U.S. defense market via a major aircraft production contract.
“If we want to be in the U.S., we have to buy companies,” Louis Gallois, CEO of Airbus parent company EADS, told reporters recently. “We are not changing our wish to create a footprint in the U.S.”
Gallois expressed “extreme frustration” over the apparent loss of a multibillion-dollar deal to build a replacement fleet for the Air Force’s Eisenhower-era KC-135 aerial refueling aircraft. EADS and its U.S. industry partner Northrop Grumman [NOC] announced last week they would not bid for the work, alleging that the Pentagon’s request for proposals (RFP) favors rival Boeing‘s [BA] smaller airplane.
EADS is actively pursuing a “mid-sized acquisition,” Gallois said, without specifying any target. He would not rule out the possibility of making such a purchase before the year is out.
Northrop Grumman-EADS won a contract to build 179 tankers based on the Airbus A330 for the Air Force in February 2008. The contract was canceled when U.S. auditors upheld a Boeing protest tied to Air Force missteps in evaluating bids.
Noting that the KC-X contract would have yielded 15 aircraft orders per year, he said the number was never significant enough to affect his company’s bottom line.
“It is not a question of size, it is a question of strategy,” he said. “It was a strategic movement…. Now we will have to find another one.”
Northrop Grumman-EADS supporters on Capitol Hill have warned that the Pentagon is left with no leverage over Boeing if a sole-source contract is awarded. A top Boeing official, however, has said that the company is still operating under the assumption that there will be a competition for the work, which Pentagon officials have said could be worth up to $50 billion over the life of the program.
Asked whether EADS is wooing another U.S. partner with which to reenter the bidding, Gallois said, “for the time being, no.” He said the May 10 deadline for bid submissions to the Air Force is “practically impossible” for EADS to meet.
Sean O’Keefe, Gallois’ North American counterpart in the company, said his focus is now on the after-market services industry in the U.S. defense and homeland security sector.
“The commitment made to the U.S. market is unabated,” he said.
O’Keefe also said that EADS is interested in pursuing a potential contract for Air Force contract to replace aging UH-1N Huey helicopters. The service released a request for information (RFI) late last year, saying that it hopes to award a contract within two years. It is seeking up to 93 commercially available helicopters for the Common Vertical Lift Support Platform (CVLSP) program (Defense Daily, Jan. 6)