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By Alwyn Scott
WASHINGTON, Sept 4 EADS is opting out
of bidding on some U.S. weapons programs as it adjusts to cuts
in U.S. defense spending, and it expects flat to lower revenue
in defense business in coming years as the cuts deepen, a senior
executive said on Wednesday.
"There's no doubt that the government sector is flat to
declining and we're forecasting the same," Sean O'Keefe, chief
executive of EADS North America, told the Reuters Aerospace and
International sales may compensate somewhat, he added. The
company is girding for a tough year for its defense business
even as its Airbus commercial jetliner business books a record
backlog of orders, including a sale of 40 jets to Delta Airlines
, announced Wednesday, a deal worth $5.6 billion at list
prices that ends nearly two decades of exclusive Boeing
sales to the U.S. airline.
O'Keefe, speaking at the Reuters office in Washington, D.C.,
said the U.S. bidding process has slowed in response to budget
cutting and sequestration, which he called "a self-inflicted
fiscal challenge that nobody's ever seen before."
He said EADS is targeting defense contracts that allow it to
build on core strengths, while avoiding far-reaching programs
that might not pay off. For example, the U.S. Army's vertical
lift aircraft program.
"I wouldn't say that we're walking away from things, we're
just being much more specific about the core competencies," he
EADS' defense-related businesses represent about 30 percent
of overall revenue with the remainder from Airbus commercial
In July the company said it would restructure and rebrand
itself under the Airbus name, a shift caused in part by its
failed effort to merge with BAE Systems PLC earlier in
the year. EADS had long sought to establish a defense-business
identity separate from the Airbus brand, which had links to the
longstanding rivalry and trade dispute with Boeing.
The attempt to merge with BAE Systems "opened up a whole new
strategy" from its previous goal of balancing the size of its
aircraft and its defense businesses, O'Keefe said.
The failed merger "gave us an opportunity to rethink what
our strategic objectives are," he said.
O'Keefe said the company isn't concerned that using the
Airbus name would put it at a disadvantage in bidding for U.S.
defense work. The competition with Boeing to supply aerial
refueling tanker aircraft, he said, showed that EADS can compete
on equal footing in the United States, and that buyers don't
need to accept sole-source suppliers. Boeing ultimately won the
$35 billion tanker deal on its lower price in 2011. Airbus won
an earlier round in 2008 with partner Northrop Grumman.
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(Reporting by Alwyn Scott; Editing by Phil Berlowitz and Andrew