KC-X and the US Industrial Base (Updated)
(Update at the bottom of this post.)
So the selection announcement for the long
running, never dull KC-X tanker competition may come as soon as Thursday. As I write this, media reports
indicate that the odds would appear to favor the EADS bid of an A330-based KC-45 tanker over Boeing’s KC-767 bid.
Putting the capabilities and cost per airframe for each
tanker aside for a moment, and the fact that likely protests will make this
competition far from over, I have been wondering about the merits of both bids
to the US aerospace industry. Of course industrial considerations are not part
of the selection process in this program, but there will obviously be
ramifications on the US aerospace industrial base depending on the choice.
Both EADS and Boeing have pumped a lot of money into
lobbying and advertising about the benefits on domestic job creation and
sustainment here in the US, and that is certainly a hot political topic this
day and age. Both companies claim that their winning bid would generate around
50,000 jobs, but depending on who wins, those jobs would be in very different
locations of the country: Boeing’s work will be at existing industrial bases in
Seattle, WA and Wichita, KS; EADS would build its tankers at a new site in
Mobile, AL. This will only add to the political wrangling when congress
inevitably weighs in.
So if we take both claims at face value, then the America
will have 50,000 extra jobs in the near term that it otherwise would not have
had. It’s a win-win either way for the American worker really – in the near
term at least, but what about the longer term?
The Boeing tanker has often been pitched as the All American
bid. It stands to reason that if Boeing, the paramount US airframer, did win
the bid then that would be a boon for the US industry, but would it? As I see
it, the Boeing bid would keep the 767 production line running for a few more
years, producing another 179 aircraft. However, the 767 is in effect commercially
dead, and has only been given a stay of execution by the delays in the 787
program. When the 179 tankers are built, then what happens? The 787 will have
already ramped up, and those KC-767 jobs may well just disappear again – many actual
workers may get absorbed into other Boeing programs, but the “jobs” will be
lost again. They are only temporary with no real long term potential. Bringing
the KC-X to Seattle won’t add anything much long term; it really just delays
the inevitable closure of the commercial 767 line.
An EADS win would create an entirely new aerospace industrial
base in southern Alabama. That is a big investment which EADS and Airbus are
unlikely to walk away from after the 179th tanker rolls off the
line. Airbus has long sought to increase its Dollar-zone supplier base, and
having its own manufacturing base in the US would be the icing on the cake.
During the previous bid, Airbus stated that it would move commercial A330F
production to the mobile site if it got the KC-45 order. If Airbus decides to
proceed with that original plan after a successful win on this bid, it would be
a significant boost to the long-term security of the site and its work force.
The Alabama site also gives Airbus the opportunity to move additional final or
component assembly work to the US on future programs if exchange rates again
make the Euro-zone costly. This would mean a longer term sustainment for the
Mobile site as a major EADS/Airbus industrial center.
My point is that although both tanker programs could employ
50,000 Americans in the near term, the KC-X doesn’t offering any new
manufacturing opportunities for Boeing which it can grow into longer-term jobs.
Boeing will choose to build or not to build its various commercial aircraft in
Seattle regardless of a tanker win or loss. Continuing 767 production for
another 179 airframes will not in itself generate a lot of long term industrial
capacity and job sustainment at Boeing. For EADS, it does; a win would mean
creating (aerospace) jobs where there were no jobs before. EADS would likely
choose to build additional aircraft or major components in Alabama and that
would be as a direct result of a KC-X win; otherwise those jobs would stay in
Europe, or go to China or elsewhere. I would therefore bet that in 10 or 20
years time, there will be a larger US industrial base in aerospace as the
result of an EADS victory over a Boeing victory in this competition.
If the KC-X contract ever get successfully awarded that
is. We’ll see.
Well, I guess you just can't trust media speculation these days :)
The KC-767 proposal (to become the KC-46) was "the clear winner" according to the Air Force today. As predicted, both proposals met all capability requirements, and it essentially came down to a simple price shootout. Boeing's victory today will dash any near-term hopes for an Airbus assembly line States-side. EADS is sensibly keeping quiet for now on what it will do next. Despite a few human errors, this selection process has been touted as much more robust than the previous one in 2008, when Boeing successfully protested the same KC-X award for the Northrop Grumman/EADS KC-45. Boeing had reasonable grounds for its protest back then, but EADS will have to tread carefully now. Any possible protest to the GAO will need to have a solid foundation. They don't want to annoy what is a still future potential customer: the USAF confirmed today that it still intends to proceed with the follow-on KC-Y and KC-Z tanker competitions. The later competitions will in part replace the air force's fleet of larger KC-10 tankers, which the A330-based KC-45 has often been seen as a more suitable replacement. EADS may be better to concede and prepare for the next battle.