EADS, Northrop see chance to win tanker contest

By Andrea Shalal-Esa and Jim Wolf

WASHINGTON (Reuters) - The North American unit of Europe's EADS (EAD.PA: Quote, Profile, Research, Stock Buzz) on Tuesday said it was investing $30 million in a bid with Northrop Grumman Corp. (NOC.N: Quote, Profile, Research, Stock Buzz) to build U.S. refueling tanker aircraft and "absolutely" believed it could win.

But EADS would not rule out withdrawing from the competition, depending on how the U.S. Air Force frames the final evaluation criteria, Ralph Crosby, chief executive of EADS North America, told the Reuters Aerospace and Defense Summit in Washington.

"We're in this because we absolutely believe we have an opportunity to win. If it ever becomes apparent that we didn't, then why waste your money," Crosby said.

"I wouldn't rule anything out. We have not seen the evaluation criteria and we have to look at that," he said. EADS alone would spend around $30 million on the aerial tanker competition, he said.

"We are in this competition with every fiber of our selves because of its importance," Crosby said. If selected, Northrop Grumman and EADS have committed to producing the tankers -- based on the Airbus A330 -- in the United States, he said.

Crosby acknowledged his team faced resistance from some U.S. lawmakers who would prefer a tanker based on a U.S. design, but said he was confident the U.S. military would conduct the competition in a fair and open way. Northrop Grumman is the prime contractor for the tanker team.

He noted that EADS just won another Pentagon competition to build 322 light utility helicopters for the U.S. Army, a deal valued at $3 billion. Crosby described that contract as "a real professional highlight and demonstrative of the kind of capability that we at EADS have talked about."

EADS beat out another European contender, Agusta Westland, a unit of Italy's Finmeccanica SpA (SIFI.MI: Quote, Profile, Research, Stock Buzz), which had joined forces with L-3 Communications Holdings (LLL.N: Quote, Profile, Research, Stock Buzz); Textron Inc.'s (TXT.N: Quote, Profile, Research, Stock Buzz) Bell Helicopter unit; and MD Helicopters Inc., a small private company, to win the helicopter competition.

EADS is due to deliver the first of the helicopters to the Army on Monday, despite a 100-day work pause ordered while the government considered two protests filing by losing bidders.

Crosby said EADS was continuing its push to boost its sales in the United States, buoyed by the helicopter win plus several smaller acquisitions over the past year. It was also keeping its eyes open for additional "bolt-on" acquisitions, he said.

EADS has also partnered with Raytheon Co. (RTN.N: Quote, Profile, Research, Stock Buzz) to compete for a $7 billion contract to build 145 new light cargo aircraft for the Army and Air Force. Defense officials say they expect that contract to be awarded in February or March.

That competition pits EADS against another Finmeccanica unit, Alenia Aeronautica, which is teamed with L-3.

"All in all, from the U.S. perspective, I believe the strategy we've laid out is a solid one," Crosby said.

He welcomed news that the Air Force planned to remove a World Trade Organization trade dispute from the tanker competition, calling it an "extraneous issue."

Boeing and Airbus have accused each other of benefiting from government subsidies in competing for commercial sales.  Continued...