Would buying a foreign flying gas station compromise America's security? The question sounds silly, but according to Boeing (NYSE: BA ) , it's truly a matter of life and death -- of putting the security of the Republic at risk.
Earlier this week, legislative beat reporter The Hill described how Boeing has been circulating a leaflet around Congress, accusing archrival airplane-maker EADS of a litany of sins:
- Operating beyond the bounds of U.S. laws on "corporate integrity."
- Attempting to sell helicopters to Iran, despite a U.S. trade embargo.
- Setting up a "shell" company in the U.S. -- EADS North America -- in order to make itself appear less "European" while competing to build the Air Force's next-generation refueling tanker.
Responding to Boeing's pamphlet, EADS North America Chairman Ralph Crosby decried the use of "falsehoods ... to prevent the fair competition that the Department of Defense has committed to for the selection of a replacement aerial refueling tanker for the U.S. Air Force."
EADS is right. Most of Boeing's claims -- but not all of them -- are demonstrably false.
Take the "corporate integrity" argument. (Please!) It's true that Europe-based EADS NV is not bound by the American Foreign Corrupt Practices Act, the "integrity" law to which Boeing refers. But the OECD Anti-Bribery Convention subjects EADS to the same basic rules of the game.
And as for the suggestion that EADS North America is anything but a legitimate subsidiary of an international corporation, much like the hundreds of such offices that Boeing operates around the globe -- that bit of spurious jingoism is just beneath contempt.
Focus, Boeing. Focus.
Ever since EADS partner Northrop Grumman (NYSE: NOC ) pulled out of the KC-X Tanker Competition, Boeing has been the odds-on favorite to win the contract. That being the case, its sudden flinging about of trumped-up accusations feels a little ... well, desperate.
The more so when you consider that in Boeing has a bona fide winner of an argument to its credit: "In the past, foreign governments have not agreed with U.S. policy and then withheld material goods and support." In essence, Boeing cautions Congress that if it awards EADS the contract "today," and America does something that France doesn't like "tomorrow," the French might instruct EADS to withhold crucial replacement parts that the KC-X needs to fly.
Listen, Fools. I try to be fair about these debates. When FedEx (NYSE: FDX ) trumped up charges that rival UPS (NYSE: UPS ) was asking for a taxpayer "bailout" last year, simply by subjecting FedEx to the same rules that UPS must play by, I pointed out the fib. (And with legislators moving forward on the Federal Aviation Administration reauthorization bill despite FedEx's protestations, it seems Congress agreed with me.)
When companies say something patently untrue, I call them on it. When a company places its own financial gain ahead of America's reputation as a champion of free trade, I call all the louder. Earlier this year, when Europe leveled accusations of self-dealing at the Pentagon in the wake of Northrop's pullout earlier this year, President Obama assured EADS and its home governments that bidding under KC-X would be "completely transparent and completely open and a fair competition." Much of Boeing's propaganda doesn't live up to that pledge.
Much, but not all. Because on the national security question, Boeing is dead right.
Boeing is right
Sure, just like the other accusations, Boeing's argument here carries the smell of day-old red herring. After all, America sells tons (literally, thousands of tons) of military hardware to our NATO allies every year. Tanks from General Dynamics (NYSE: GD ) . Rocket systems from Raytheon (NYSE: RTN ) . Fighter jets from Lockheed Martin (NYSE: LMT ) . You don't hear Britain and France complaining that we're undermining their security with these. But the opposite isn't necessarily true.
History is replete with examples of foreign countries disagreeing with American foreign policy, and reaching into their diplomatic toolbox for non-military means to express their displeasure. And when France cries foul over Boeing's alleged jingoism, we should remind them: In 1986, when the U.S. wanted to fly Britain-based F-111 bombers through its airspace to bomb Tripoli in reprisal for Libya's role in an attack in Germany earlier that year, France said "non," and forced us to take the scenic route.
Simply put, the threat that a French-built KC-X could be "used against us" is real.
Foolish final thought
Granted, it may also be solvable. As one workaround, EADS could be required to include in its bid the cost of stockpiling strategically important parts in the U.S., to safeguard against a future export ban. Or we could demand that EADS manufacture such parts here in the U.S., rather than France, giving employment to a few more of the hundreds of thousands of U.S. workers who've lost their jobs in the Great Recession. So there are options.
If those options raise the cost of EADS doing business with the U.S. Government, if they improve Boeing's chances of winning KC-X, make Boeing a safer investment, and add profits to the pockets of Boeing shareholders -- so be it. That's the price of national security.
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