Boeing's Audacious Allies

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Mulling Complaint to GAO

Boeing officials have been careful not to say that the Pentagon should have favored their "American" plane. They have kept their criticism focused on the terms the Air Force set for the competition and the quality of the two offerings. Yet they may still try to get the tanker decision overturned. On Mar. 7, after getting briefed by the Pentagon about its reasons for giving the contract to EADS/Northrop, Boeing executives said they will give serious consideration to filing a protest (BusinessWeek.com, 3/7/08) with the Government Accountability Office (GAO), the investigative arm of Congress.

They are sure to get plenty of support. "It's an irresistible issue during an election year," says Richard Aboulafia, vice-president of analysis for Teal Group. But to some observers, such protests ignore the realities of modern aerospace contracting, for both commercial and military projects. The aerospace giants increasingly look to suppliers with expertise, wherever they may be.

For example, two of the Japanese suppliers for the 787 had experience supplying composite parts for high-speed trains. In the case of the Dreamliner, so much new manufacturing space was needed—3 million square feet—that Boeing spread the work around the world so that parts could be produced concurrently, rather than sequentially, which would take more time. Given the complexity of the newest aircraft, any big order is likely to ship some amount of work overseas.

International Supply Chain Grows

"It's a little hard to complain about foreign content on the future tanker when Boeing's Dreamliner was designed for manufacture by a global supply chain," says Loren Thompson, a defense analyst at the Lexington Institute with close ties to the military. In fact, he asserts, the 787 "will probably end up having more foreign content than the Airbus tanker."

Indeed, the Dreamliner's 70% foreign content compares with 40% foreign content for the winning refueling tanker as designed by Northrop and EADS, and 15% for the Boeing tanker design. Boeing spokesperson Daniel Beck dismisses the comparison "between an aircraft developed solely for an international commercial market and a tanker aircraft developed solely as a military asset." Still the technologies are similar. Both tankers are juiced-up commercial jetliners after all—in Boeing's case, an upgraded 767; in EADS/Northrop's case, an Airbus 330.

Boeing's supply chain was becoming more and more international even before the birth of the 787. Where previously it had outsourced parts for planes but completed assembly in Washington, with the 787 it contracted out design and sub-assembly responsibilities as well.

"Boeing's supply chain is global, its sales are global, and even its current ad campaign promotes its globalness," says Todd Malan, president and CEO of the Organization for International Investment, a Washington-based association representing U.S. operations of foreign companies. "It's a little disingenuous for them to criticize others in the industry for being globally integrated."

Crown is a senior correspondent for BusinessWeek and BW Chicago. Epstein is a correspondent in BusinessWeek's Washington bureau.