EADS and its American partner Northrop Grumman have abandoned their joint bid for a $35 billion contract to build tanker jets for the US military, citing unfair competition as their reason for withdrawing. German commentators on Wednesday sense more than a whiff of hypocrisy from European governments.
Politicians in Berlin and elsewhere in Europe are accusing Washington of protectionism over the collapse of a deal for the construction of 179 refueling tanker planes that pitted European aerospace giant EADS and its Airbus subsidiary against Boeing. Berlin is claiming the bidding process conducted by the US Department of Defense was so custom-tailored to Boeing that EADS' American partner company, Northrop Grumman, had virtually no chance of scoring the lucrative $35 billion contract.
On Tuesday, German Economics Minister Rainer Brüderle expressed his disappointment over the Defense Department's behavior in the deal, which led to a decision by Northrop Grumman on Monday to withdraw completely from the bidding process. "Free competition cannot be unilaterally limited in the procurement of defense goods," the politician, a member of the business-friendly Free Democratic Party, told reporters. "Right now, in the midst of the current crisis, even hints of protectionism can be damaging."
The heads of economics issues in the parliamentary groups of Germany's three largest political parties in the Bundestag were even sharper in their criticism. Joachim Pfeiffer of the Christian Social Union, the Bavarian sister party to Chancellor Angela Merkel's conservative Christian Democrats, told reporters: "This is a scandalous, unacceptable act. This needs to become a political issue with the USA."
'You Can't Change the Rules Just Because You Don't Like the Winner'
"The government has to push the United States to cease its protectionist tendencies," the FDP's Paul Friedhoff told the Ruhr Nachrichten newspaper. Meanwhile, Garrelt Duin of the center-left Social Democratic Party, told the tabloid Bild: "This is a sleight of hand on the part of the Yanks. The Americans only talk about free competition when it is to their advantage. You can't simply change the rules of the game just because you don't like the winner."
On Tuesday, an Airbus spokesman told SPIEGEL ONLINE: "During the first bidding process two years ago, the best aircraft was sought." But this time around, the criteria had allegedly been specifically tailored to the Boeing 767. The Americans sought a "small aircraft whose only purpose was refuelling," the spokesman said. But the only aim was to "shut us out." By doing so, he argued, the Americans "would for the first time in their history have worse equipment than the Brits or the Australians."
In Germany, analysts attributed the collapse of the deal to the strength of Boeing's lobby in Washington. "Boeing is one of the biggest US companies," said Stefan Schöppner, an analyst at Germany's Commerzbank. "In the current economic environment, lobbyists are putting the US government under massive pressure in bidding processes like these." Schnöpper said there are still opportunities for EADS to land smaller contracts in the US, "but not for a fat project like tanker jets."
In Brussels, the European Union's trade commissioner, Karel De Gucht, described the development as "regrettable." "It is highly regrettable that a major potential supplier would feel unable to bid for a contact of this type," he said. "Open procurement markets guarantee better competition and better value for money for the taxpayer." He said the European Commission would be "extremely concerned" if it were to turn out that Washington had created terms that inhibited Northrop Grumman from securing the contract. "The Commission will be following further developments in this case very closely."
But editorialists at most German newspapers on Wednesday, regardless where they fall on the political spectrum, called the politicians' bluff. When it comes to defense contracts, they write, Europe is every bit as bad as the US in terms of serving its own interests.
The center-right Frankfurter Allgemeine Zeitung writes:
"Of course European politicians have the same right as executives at EADS and Northrop Grumman to accuse politicians in Washington of an unfair bidding process. Some countries have, in fact, shown a preference for the EADS/Northrop aircraft over Boeing's model. But Boeing's tanker isn't so bad that its purchase would weaken the American military. The aircraft may even have other advantages -- like its modern cockpit and the ability to conduct tanking in an entirely manual manner, which could be advantageous in a combat situation. The EADS tanker can hold more fuel, more cargo and more passengers. But the same is true of the American C-17A transport plane and the Russian Antonov An-70. Europe could have purchased those aircraft, but instead decided to develop its own expensive and complex military transport plane. The original plan was also to use American Pratt & Whitney engines on the A400M -- in the end, owing to political considerations, they had to be developed in Europe."
"The defense industry is far from being a normal business but that should change. Today's practices cost taxpayers a lot of money and also lead to a situation in which armies seldom get the best products for their money -- up to and including toilet paper. But for Europeans to insinuate that everything about the Americans' defense bidding processes is particularly terrible, is hypocritical and nothing more than a political ritual."
The Financial Times Deutschland concurs that Europe is equally guilty of protecting its defense industries, writing:
"The Europeans shouldn't be pointing their fingers at Washington. Instead they should be asking all participants what kind of economic and political damage their protectionist games are causing. Paradoxically, the loss of the US contract could be good news for Airbus investors. A fixed fee had been set for each aircraft and, as the cost overruns with the European A400M military transport aircraft have shown, fixed pricing can present a huge risk. Besides, EADS already has enough major risks on its hands. There are still production problems with the A380 jumbo jet. And the company still needs to develop its A350 widebody model. Finally, the A400M disaster has blown a huge hole in the company's budget. EADS and Airbus have both shown in recent years that the companies have trouble completing major projects. Instead of jumping into a new adventure, the company should get a handle on its existing problems."
The conservative Die Welt writes:
"Defense is not a normal industry because it produces strategic goods. Every country seeks to protect its domestic weapons industry so that its military know-how stays in the country and its own defense capabilities are protected. On the European market, EADS and others profit from this protected status, and they also count on countries to act 'patriotically' when they place orders. In America, Boeing has now exploited its home team advantage. It's not very nice and it's also ineffective. As a rule, it makes defense projects more expensive for taxpayers and soldiers often get equipment that is second-best. In Germany, for example, the military is still waiting for (EADS-built) combat helicopters that are capable of deployment in Afghanistan."
"It would be desirable if open competition could, at the very least, be opened up between NATO members. But it would also mean that Europe would have to stop its common practice of senselessly developing some of its own products when it could just buy them from America."
'Long-Predicted Defeat in America'
The left-leaning Berliner Zeitung writes:
"If the conditions for the bidding process remain and the Europeans do abandon the project, it will doubtlessly be a setback for trans-Atlantic competition. But the Europeans are also guilty. The procurement and, especially, the ordering of defense goods has in Europe, as in America, more to do with political and regional considerations than with price or performance. Europe's A400M military transporter is an ugly example -- especially given its sheer expense. Because the losses on this project have been so great, EADS was only too happy to divert attention to America. With this long-predicted defeat in America, EADS is hoping people will pay less attention to its own bad results."
The center-left Süddeutsche Zeitung writes:
"From the American perspective, this tug-of-war over the tanker bidding process had less to do with a dispute with the Europeans and more to do with a conflict between the northern and southern American states. Traditional major US companies like General Motors, Boeing and General Electric have all settled in the north. This is the base of what remains of the unions in America, which are closely connected to Obama's Democratic Party. In the South, where Republicans govern, new industry centers are being created. States like Alabama, Tennessee and Louisiana have been intensively courting foreign investors and, by doing so, are starting to compete with the North." (Editor's note: Airbus had planned to establish an assembly plant in the south if it won the contract.)
"Of course industrial-political intrigues will influence the procurement of the tanker. Boeing was a monopolist when it came to providing Air Force equipment for decades. And in this time it built up a very tight network in Washington. It's extremely difficult to cut through such structures quickly. Besides, America gives a strong domestic defense industry the highest priority, just as Europe does. Why else would Germany, France and other EU countries have moved recently to give EADS a massive contract to build its own A400M military transporter?"
"As long as the Americans and Europeans fail to recognize how backwards their thinking is in a globalized world, there will be no fair military bidding processes. In the meantime, both sides should shy away from instumentalizing the issue. The still weak global economy could hardly cope with a trans-Atlantic trade war."
Business daily Handelsblatt concludes:
"One thing is certain: The common trans-Atlantic defense market is little more than an illusion. In fact, Europe doesn't even really have an open defense market. The planned European defense procurement agency EDA is little more than a paper tiger. The Germans, Brits and French guard their domestic defense industries very closely, hindering public bidding processes and mergers. But it's an expensive luxury in these times of tight budgets."
-- Daryl Lindsey
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