In addition, EADS has been under investigation in France for the past five years in connection with alleged insider trading tied, presumably, to the company’s abysmal financial track record. In early February, the Paris judges said they were focusing the investigation on Daimler. In particular, EADS‘ massive cost overruns have gotten so bad lately that the German government has scheduled an emergency summit on Wednesday to discuss bailing out Daimler by nationalizing Daimler’s 7.5 percent stake in EADS. According to the Financial Times, EADS‘ losses cost Daimler 231 million euros in the last year alone. Is that really the kind of company we want the Pentagon to be keeping?
Here is what U.S. taxpayers can expect in EADS‘ performance. The company’s A400M military transport plane program is surviving only because of a $4.6 billion bailout forced from European taxpayers in November 2010. The A400M program originally was to cost $27 billion; a recent study found that final costs could rise to $44 billion. The program is three to four years behind schedule.
It is not easy getting a company with such a dismal past cleared to win what may prove to be the largest Pentagon contract ever. In January 2010, then-Rep. Todd Tiahrt of Kansas wrote in Human Events: “Given the well-known corruption practices by EADS, it would make common sense that it not be awarded Pentagon contracts. In fact, Congress has passed the Foreign Corrupt Practices Act that bars companies who engage in bribery overseas from competing for United States government programs.
“The U.S. Department of Justice has appallingly interpreted the laws to cover only U.S.-based companies - therefore exempting EADS. But it gets worse. The federal government has gone even further and exempted EADS from the Buy American Act, the Berry Amendment, the International Trafficking and Arms Regulations and the Cost Accounting Standards. Complying with these expensive regulations is mandatory for any American company looking to do business with the Pentagon, but waived for a foreign competitor such as EADS.”
If these considerations were not grounds enough for denying EADS the KC-X contract no matter what price it offers, there are other compelling reasons to have the tankers made in America. These include: EADS has a highly politicized socialist work force in Europe, one that has exhibited profoundly anti-U.S. sentiments in the past. Do we really want to rely on such workers in the event their efforts are essential to future combat operations with which they vehemently disagree?
There also have been issues of technology theft and commercial espionage associated with EADS. With the Kremlin owning a 5 percent stake in the company, the security implications of such behavior cannot be minimized.
Taken together, the arguments against turning the future of a key determinant of America’s power-projection capability over to EADS are compelling. If the Obama administration persists in its efforts toward that end, it likely will find Congress less willing to ignore the strategic and economic repercussions of such a step. That is especially true insofar as doing so would give the lie to the universal mantra of politicians on both sides of the aisle promoting American competitiveness and the need to expand the number of skilled jobs here at home.
Alternatively, the Government Accountability Office may find irregularities in the KC-X award (notably, the Pentagon’s inexplicable sharing with EADS last November of proprietary, competition-sensitive data supplied by Boeing) that once again justify overturning an ill-managed award.
Either way, the real loser will be the service members who needed a reliable and capable new tanker years ago - and certainly deserve no less now.
Frank Gaffney Jr. is the founder and president of the Center for Security Policy and author of War Footing: 10 Steps America Must Take to Prevail in the War for the Free World .
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