The EADS tanker contradiction

One major reason voters are fixated on change this election cycle is that to them our government appears dysfunctional. Sadly, this observation has much truth to it – at times the three Federal branches and various agencies work against one another, rather than strive to achieve common goals. 

A perfect example of such dysfunction is the recent announcement that the next generation U.S. Air Force tanker will be based on the Airbus A330 jetliner currently built in Toulouse-Blagnac, France. This selection may seem reasonable to Department of Defense (DoD) procurement personnel, but it directly undercuts other actions by other arms of our government.

[More]For example, having just added $140 billion to the deficit by providing tax rebate checks and business incentives with the hope of creating more investment and jobs, Congress is less than pleased at the $35 billion tanker contract which will mainly produce jobs in Europe and not in America.

Airbus’ parent company, the European Aeronautical Defense and Space Company (EADS) has made numerous assurances that its KC-30 tanker team will eventually create as many as 25,000 jobs in the United States. As the New York Times and others have pointed out though, such calculations are highly speculative. [1]  

For evidence of how truly tenuous the job numbers are, one only has to visit the KC-30 website.  In the state-by-state economic plan listed on the site, it is claimed over 208,000 jobs will be created, supported, or sustained. [2]  If true, this would mean that the modern technological marvel that is the KC-30 requires over three times the manpower to build than the last truly great French engineering success, the Suez Canal. [3]

Needless to say, a healthy dose of skepticism regarding the economic benefits of the KC-30 is not only appropriate but highly recommended. This would not be the first time EADS or its subsidiaries have used deceptive advertising or creative accounting. In April 2007 Airbus was called to task for ads claiming, "Half of the new Airbus A380 will be produced by U.S. Companies," while at the same time the French press was reporting that only 21% of the A380 was made in all the countries of North America combined.[4]

In February 2006 an EADS ad – one made for the very same aircraft the U.S. Air Force wants to purchase – came under scrutiny by England’s Advertising Standard Authority (ASA).  In the ad an image of the Airbus A330 tanker carried the slogan: "I am British." The ASA ruled that the advertisement breached its codes on substantiation and truthfulness, and subsequently banned it from the national press.[5]

Additionally, in a 2003 response to Senator Patty Murray’s requested investigation into Airbus claims – that it created 100,000 jobs in the United States, and contracted with more than 800 U.S. firms – Under Secretary for International Trade Grant Aldonas confirmed that Airbus wildly overstated its contributions to the United States economy and that it could only verify 500 of the "created" jobs and it could only find 250 of the 800 subcontractors Airbus claimed.[6]

Given such prior exaggerations, it is hardly surprising that EADS is now making the outrageous claim that the A330 tanker is an "American" airplane and will have 59% U.S. content, based on labor, materials and subsystems.[7]  The real surprise is that anyone would believe them.

Another reason the A330 is a puzzling contract choice is that the U.S. is currently involved in a trade dispute over illegal subsidies to Airbus.  The U.S. Trade Representative has an open formal complaint with the World Trade Organization alleging that European Union nations have provided Airbus with billions of dollars of unfair subsidies to the detriment of the U.S. aerospace industry.[8]

In total Airbus has received over $15 billion in such support, according to U.S. and European government documents.   As BusinessWeek commentator Stanley Holmes wrote, "Commercial plane manufacturing is probably the riskiest business on the planet. Launch aid shifts the risk from Airbus to the European governments because the manufacturer isn’t required to repay if the aircraft program is unsuccessful."[9]

Since 2000, this launch aid combined with other subsidies has allowed Airbus to gain 20 percentage points of market share, all taken directly from U.S. airplane manufactures.[10]

DoD’s decision to purchase one of the very aircraft documented by the U.S. Trade Representative to have received illegal European subsidies that directly harmed U.S. firms and workers is beyond dysfunctional; it is indefensible.

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