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Subsidizing EADS

Judah Grunstein | Bio | 10 Mar 2008

Really, the more I read about the Air Force tanker contract, the better the deal looks for EADS. Basically, EADS will be building commercial Airbus A330's and handing them off to Northrop Grumman for the sensitive mil tech upgrades that will make them USAF compatible. In other words, in addition to the European subsidies it already enjoys as a semi-national enterprise, EADS will now also be receiving a de facto American subsidy (ie. a guaranteed order for 179 planes) to establish a productive beachhead in the dollar zone. And with the Euro at a buck-fifty and climbing, that $600 mil start-up cost is looking like a bargain basement affair.

EADS chairman Louis Gallois has been talking about outsourcing production to the dollar zone since late 2006, saying early last year, "We cannot continue to produce at our current euro costs and sell at Boeing's dollar prices." Last December, Gallois even conditioned the move to Alabama on winning the tanker contract. So while building the aircraft stateside and the job creation bit (1300 of them) might appease Congress (which is investigating the contract), it's more likely to appease EADS shareholders.

Update: WPR Editor Hampton Stephens just found this nugget:


Gotta love it.