June 19, 2008 / 7:59 PM / 9 years ago

UPDATE 1-Northrop defers planned tanker groundbreaking

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By Jim Wolf

WASHINGTON, June 19 (Reuters) - Northrop Grumman Corp (NOC.N) said on Thursday it was putting off indefinitely a planned groundbreaking ceremony at a Mobile, Alabama, site where it was set to modify Airbus aircraft into U.S. Air Force tankers.

“For obvious reasons, we are deferring” the scheduled June 28 event, Randy Belote, a Northrop spokesman, said a day after government auditors upheld a challenge to the tanker contract by losing bidder Boeing Co (BA.N).

Airbus is a unit of EADS EAD.PA, Northrop’s partner in what was to be the Air Force’s new KC-45 refueling aircraft based on the Airbus A330.

On Feb. 29, the Air Force had bypassed Boeing to start buying 179 aircraft over 15 years valued at $35 billion from the Northrop-EADS team. This was to be the first of three projected acquisition phases for what the Air Force calls its No. 1 purchase priority.

Los Angeles-based Northrop, in an apparent show of confidence that the ruling on Boeing’s protest would go its way, had invited media to the Alabama groundbreaking only hours before the Government Accountability Office ruled on Wednesday.

Far from siding with Northrop, the investigative arm of Congress found the Air Force botched its tanker selection process and urged the armed service to invite new bids and rerun the competition -- a process that could take a year or more.

The Air Force, for its part, did not respond to a question Thursday about whether it was extending a stop-work order that froze Northrop’s contract pending the GAO’s conclusions.

Northrop Chief Executive Ronald Sugar told a May 30 Wall Street conference the company was “looking forward to resuming work on this very important program on June 19th,” the deadline for the GAO ruling.

Editing by Richard Chang

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