Boeing chief races to save £13bn RAF tanker deal

Corporate Scandals: US giant admits customer confidence hit; Enron whistleblower sounds fresh alert
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The Independent Online

The head of Boeing's defence business yesterday made a last-ditch effort to persuade the Ministry of Defence that the ethics scandals which have rocked the US aerospace giant should not affect its bid for a £13bn tanker refuelling contract from the RAF.

The move came as the Pentagon extended its investigation into Boeing to cover not just a $27bn (£15bn) contract to lease tanker aircraft to the US Air Force but a range of other big procurement orders dating back to 2000.

Jim Albaugh, president and chief executive officer of Boeing integrated defence systems, conceded that the resignations of the company's chairman and chief financial officer over allegations of industrial espionage and improper hiring of senior Pentagon officials had damaged its corporate reputation. He also admitted that it would take "some time" for Boeing to rebuild trust among customers.

Speaking after meetings in London with senior UK defence officials including, it is thought, the Defence Secretary Geoff Hoon, Mr Albaugh said: "I came to make sure the customer understands that while Boeing has had some issues, it is not dependent on any one person. When you have a company of 160,000 people you are going to have some problems and we have.

"There are some people who made some wrong decisions, no question about it. But I would reject the idea we have a systemic issue."

Mr Albaugh also made it clear that Boeing's new chief executive, Harry Stonecipher, was ready to come to the UK to reassure the MoD over the tanker refuelling contract although he could not visit until the new year.

The MoD is due to decide before Christmas between Boeing and a rival bid from a consortium led by EADS, the majority shareholder in Airbus Industrie. Boeing is offering to convert a fleet of 21 British Airways 767s into air-to-air refuelling tankers for the RAF. The EADS consortium is offering a mix of new and used Airbus A330 aircraft. The 27-year contract is being let under the Private Finance Initiative and is the largest awarded by the MoD.

Phil Condit, the Boeing chairman, was forced to stand down last week over the latest ethics scandal involving the hiring of a former senior Pentagon official. Darleen Druyun, deputy head of procurement at the Pentagon, is alleged to have acted improperly by giving Boeing information about a rival bid for the USAF contract from EADS.

Mike Sears, Boeing's chief financial officer, was sacked a fortnight ago after it emerged that he had tried to conceal his contacts with Ms Druyun before she was offered a job with Boeing.

Mr Albaugh said he had not offered his own resignation because he had not been involved in the hiring of Ms Druyun, even though she came to work for a part of Boeing run by him.

The Pentagon investigation into Boeing is expected to last six to eight weeks. It is likely to cover other contracts in which Ms Druyun was involved including orders for upgraded airborne early warning aircraft, small-diameter "smart bombs" and space launchers.

Mr Albaugh said if Boeing was stripped of the tanker contract, it would result in several hundred job losses in various US plants. It would also deal a fresh blow to Boeing's aim of increasing defence revenues by 10 per cent a year from their current level of $27bn.

Among the Pentagon business Boeing hopes to win in the coming year are contracts for anti-submarine aircraft, missiles and new communications satellites.