Battle for US defence contract could have major repercussions

Boeing Co. and Netherlands-based EADS are in a battle that could redraw the boundaries for U.S. defense contracting for years to come. The nine-year brawl over a $35 billion Air Force contract to replace the military's fleet of aerial-refueling tankers could land the first foreign aircraft-production facility in Boeing's home market, giving EADS a foothold from which to chip away at its archrival's military business.  This point is underscored by the exceptional spending by both companies to influence the outcome.

"I think both companies understand that this is a crucial competition and are spending as much money as necessary to position themselves," said Loren Thompson, defense analyst at the Lexington Institute, a Washington, D.C., think tank. Industry insiders say Boeing appears to be outspending EADS in advertising as it takes its argument straight to Main Street, warning an award to a European-led consortium would hurt U.S. manufacturing and could even jeopardize national security. The campaigns aren't likely to influence Pentagon leaders directly, but are meant to sway public opinion and Congress. Legislators in turn would try to pressure Defense Secretary Robert Gates and procurement officials.

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