Boeing Thinks It's too Good for the U.S. Air Force
With the fiscal cliff looming, and defense contractors girding their loins for an expected $500 million "sequestration" of defense spending any day now, you'd think companies like Boeing , Lockheed Martin , and Northrop Grumman would be scrambling for every contract they can land, grasping at straws, and fighting over even the table scraps falling from the Pentagon's table.
You'd be wrong.
As a matter of fact, the big news today appears to be of defense contractors expressly declining to bid on Pentagon weapons contracts. Take Boeing for example. On Tuesday, the defense giant announced that neither it, nor partner Textron's Bell Helicopter unit, intend to bid on a U.S. Air Force competition to build 112 new combat rescue helicopters.
Explaining the company's seemingly strange lack of interest, a Boeing spokesman noted that although its Chinook helicopter, and the Osprey tiltrotor aircraft that it builds with Textron, are "often the go-to aircraft for the U.S. Army, Marines and Air Force Special Operations Command when needing to extract personnel from dangerous situations." The 'copters simply "exceed the parameters of the USAF's Combat Rescue Helicopter program."
In other words, Boeing's aircraft are just too good for the Pentagon. They do more (and presumably the real sticking point -- they cost more) than what the Pentagon is looking for them to do (and cost). Turns out, the Air Force has set a $6.8 billion ceiling on the project, and says it may disqualify anyone who bids higher than that.
The crowd bidding for the right to build the Air Force's new whirlybird got even thinner today when an additional pair of potential bidders, Northrop Grumman and Europe's AgustaWestland, confirmed that they too will pass on the rescue 'copter project. Again, price may have been an object here.
Foolish takeaway
What this means, in essence, is that there's really only one major builder in the whirlybird business, which has a shot at this contract: United Technologies' Sikorsky unit appears to be the "last man standing," and the presumed winner of the $6.8 billion prize.
When it comes to defense contracting work, Boeing's one of the biggest beats on the block. However, the company's execution problems and emerging competitors have investors wondering whether Boeing will live up to its shareholder responsibilities. In this premium research report, two of The Fool's best industrial industry minds have collaborated to provide investors with the key, must know issues around Boeing. They'll be updating the report as key news hits, so make sure to claim a copy today by clicking here now.
The article Boeing Thinks It's too Good for the U.S. Air Force originally appeared on Fool.com.
Fool contributor Rich Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Lockheed Martin, Northrop Grumman, and Textron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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