After years and years, the question remains: Who will build the Air Force's next-generation refueling tankers?

The Pentagon is expected to accept bids on the $35 billion contract as early as next month.

But there's also speculation that the government could split the contract for 179 new KC-X planes among the two contenders, Boeing Co., and a team comprising L.A.-based Northrop Grumman Corp. and European Aeronautic Defense and Space Co.

"It's been a frustrating process to say the least," said Randy Belote, a spokesman for Northrop. "But we have confidence that we will win it and win it in its entirety as we offer the best deal in quality and price."

Boeing was originally awarded the contract in 2003, but it was canceled three years later over bid-rigging. A revamped contract was awarded to Northrop in February 2008, but government auditors ruled that the decision was unfair to Boeing after an appeal by the Chicago-based aerospace company. That contract was canceled.

Defense Secretary Robert Gates has said doesn't want to split the contract because it would cost more in the long run due to maintenance. John Murtha, the Pennsylvania Democrat who chairs the House defense appropriations subcommittee, has suggested a split.

Both Boeing and Northrop have indicated publicly that they will bid on the contract whether or not it is divided up. But both companies would prefer the full order.

"We will follow the lead of whatever the Department of Defense mandates," said Bill Barksdale, a Boeing spokesman. "We have been working hard the last few years to nail this deal and have a lot to offer the government but are holding our breath."

Daniel Goure, a defense analyst and vice president of Arlington, Va.-based Lexington Institute, said that prolonging the bidding process will put military operations at risk.

"The majority of these tankers are outdated, and average 50 years old," Goure said. "It could be years before the entire fleet is able to be replaced even with a contract awarded now."

Ducommun Jobs

Ducommun AeroStructures Inc., a subsidiary of Carson-based Ducommun Inc., announced last week that it had won a contract valued at $75 million to produce aircraft fuselage panel assemblies.

The contract was awarded by Ruag Aerospace Ltd. of Switzerland, with the assemblies to be used in Bombardier CRJ regional jets, according to Joseph P. Bellino, Ducommun's vice president and chief financial officer.

The first set of panel assemblies is scheduled to be delivered in the third quarter of this year with full-scale production starting by first quarter 2010. All work will be done at Ducommun's Gardena and Orange facilities.

The contract will lead to an additional 10 to 20 local production jobs. Ducommun AeroStructures employs about 300 people locally that help manufacture large structural components and assemblies in aluminum and other metals for various military and commercial aerospace applications.

The contract is a rare piece of commercial aircraft work, as orders in that sector have plummeted with the recession. Ducommun's military orders have provided it with enough work to offset the decline in commercial contracts. The company's first quarter earnings report, released last week, showed that 61 percent of its business is for military contracts.

The company posted quarterly net income above Wall Street expectations.
Revenue was at $111 million, up 13 percent from last year.

Job Losses

L.A.'s manufacturing sector recently got bad news with a report that showed jobs shrunk by 12 percent in 2008, according to the 2009 Directory of California Manufacturers, which was released last month.

The directory, published by Evanston, Ill.-based Manufacturers News Inc., shows that the local manufacturing sector lost 7,173 jobs last year. Los Angeles is the largest manufacturing employer in California.

The directory ranked Los Angeles as the fourth largest city in the United States by industrial employment in 2007, but dropped it to fifth in 2008. The city still accounts for 90,671 industrial jobs.

Staff reporter Francisco Vara-Orta can be reached at fvaraorta@labusinessjournal.com or (323) 549-5225, ext. 241.

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