After months of deliberation, the US Air Force announced in March that Northrop Grumman Corporation and its principal subcontractor, EADS North America, have won a coveted $40bn contract to build next-generation aerial refuelling tankers. This follows nearly six years of planning and investment by Europe’s biggest aerospace firm and its US partner.
Under the contract, Northrop and EADS will build up to 170 tankers based on the Airbus A330 jetliner. The first planes are expected to enter service in 2013, replacing aircraft in the Air Force’s ageing fleet of KC-135s. Northrop is the prime contractor; EADS is the principal subcontractor.
The announcement was not without controversy. The competition for the contract pitted rivals European-based EADS and Chicago-based Boeing against each other. Boeing proposed a smaller and lighter tanker to be built in Everett, Washington. The Northrop-EADS team presented a larger, more flexible design that is arguably less expensive to maintain. Boeing is challenging the decision.
The award is big news for EADS and Mobile, Alabama, the location selected for the aircraft assembly. It will be the first large aircraft assembly facility for EADS and its subsidiary Airbus outside of continental Europe. It will put Mobile in the big league of aerospace activity, and will be the first new assembly facility in the US for 40 years.
“In the past 20 years, US aerospace manufacturers have moved more of their investment and manufacturing offshore because of demand in the markets they are trying to serve,” says Guy Hicks, EADS North America vice-president, communications. “This will reverse that trend.”
The $500m-plus facility, to be built at Brookley Industrial Complex, is expected to become a huge magnet for suppliers. It will expand EADS’ footprint globally and in the US. “Since commercial aircraft are sold in dollars and given the exchange rate today, we need to do more work in the dollar economy,” says Mr Hicks.
That is important because, in addition to military aircraft, the company will build commercial aircraft: about 40 large double-aisle aeroplanes per year. When up and running, the facility is expected to employ nearly 2000 people.
In January 2005, before being tapped by Northrop to be a partner on the tanker deal, EADS had announced its intention to build a US facility for large commercial aircraft assembly if it succeeded in obtaining the military deal. “We put out a nationwide request for information and had 32 states propose 70 locations based on the RFI [request for information],” says Mr Hicks.
That list was narrowed to Alabama, Mississippi, Florida and South Carolina, with Alabama winning the selection. The criteria included a large area capable of accommodating a 93,000-square-metre facility, strong logistics support, seaport access for parts coming by ocean barge, a runway and a strong educational infrastructure on which to build and sustain a well-trained workforce.
“Mobile met all these criteria and exceeded most,” says Mr Hicks.
NORTHROP GRUMMAN CORPORATION
Los Angeles, California
Business sectors: Information and services, electronics, aerospace, shipbuilding
Annual revenues: Net sales in 2007 were $32bn