Newsday March 04, 2008
$40B deal a boost for Northrop Grumman
By James Bernstein
Northrop Grumman Corp.'s surprise win Friday of a $40 billion Air Force contract to build re-fueling aircraft will give the company a revenue stream that will stretch for decades, as well as additional jobs and increased prestige within the military industry, analysts said Monday.
The other victor in the competition to build tanker airplanes is the European Aeronautic Defense and Space Co., the parent of Airbus Industries of France, Northrop Grumman's partner.
With the contract, Airbus will take a giant leap over its decades-old rival, Boeing Co., which was the loser in the competition.
In terms of concrete benefits to New York, where Northrop Grumman has operations on Long Island, Tim Paynter, a spokesman for Los Angeles-based company, said Monday that the contract will bring about 353 jobs to New York State. That will include 17 at the company's Bethpage facility, and others at subcontractors elsewhere on Long Island and upstate.
Paynter said that the Long Island subcontractors are Telephonics Corp. of Farmingdale, which is to manufacture communications equipment for the new tanker; Orkal Industries of Carle Place, which provides aircraft logistics support; W.S. Wilson Corp. of Port Washington, a distributor of aircraft bearings, and Ametek Thermal Systems Inc. of Garden City, which makes heat transfer equipment.
The contract is expected to pump about $45 million annually into New York State's economy, Paynter said.
Overall, Northrop Grumman officials have said, the contract will create about 25,000 jobs nationwide. About 60 percent of the tanker's content is to come from the U.S. The remainder will come from European countries, which will build the new tanker based on the existing Airbus 330 airplane. The contract calls for 179 re-fueling planes to be built.
"We will be associating tanker aircraft with Northrop Grumman for the next 35 to 40 years, instead of Boeing," said Paul Nisbet, who follows the military contracting industry for JSA Research Inc. in Newport, R.I. Boeing had been building tanker airplanes for the Air Force for decades and was widely expected to win the competition. Now, analysts believe, Northrop Grumman will have the inside track as more tanker planes need to be replaced.
Loren B. Thomson, an analyst at the Lexington Institute, a think tank in Northern Virginia, said winning the deal puts Northrop Grumman squarely back into the aircraft-building business.
"As everybody knows, Northrop Grumman has been losing ground in the military airplane market," Thompson said. "This will restore them to the first rank. This also gives them a stream of revenue that continues literally for decades and allows Northrop Grumman to pursue other opportunities."
But critics have raised questions about the Air Force's decision to award the contract, partly at least, to a foreign company at a time when America faces a recession. Sending jobs abroad has been an issue in the current presidential campaign.
John Pike, director of Globalsecurity.org, a Washington, D.C.-based think tank, said he believed money and jobs could have been saved by upgrading the Air Force's existing fleet of tankers.
"As a citizen, I feel I'm being ripped off because we're getting planes we don't need," Pike said. "As a citizen I feel I'm being ripped off because jobs are going" overseas.
The congressional delegation in Washington State, where Boeing has its major manufacturing facilities, has been harshly critical of the Air Force decision. Air Force officials said job-creation was not a factor in its decision.
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