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Q&A: Ex-NASA chief makes the Washington connection for European firm EADS

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By Marjorie Censer
Monday, May 31, 2010

Sean O'Keefe took over as chief executive of European Aeronautic Defence and Space North America late last year. He enters the job at a key time for the company. EADS, partnered with Northrop Grumman, won a 2008 competition to build the U.S. Air Force a fleet of new aerial refueling tankers, but the competition was restarted after competitor Boeing successfully challenged the award. Now, Northrop has opted not to compete and EADS plans to vie for the contract alone.

O'Keefe is a former NASA administrator and chancellor of Louisiana State University.

Capital Business recently interviewed O'Keefe. What follows are edited excerpts from that conversation:

It is the biggest aerospace company in the world and yet, at the same time, it is a company that has evolved over just the span of the last decade. So it's still in definition phase, in terms of what the overall corporate focus is and how the market concentration will work.

From just a Washington standpoint, yes, I've certainly had a few miles on me in this town and [I'm] not an unknown commodity in that regard. And a lot of relationships built over the last several years make the openings of conversations on a business basis much easier.

We're looking at a commercial airframe that responds to more than three-quarters of the fundamental requirements of what the Air Force is looking for. And then how you adapt the configuration to meet the balance of those requirements is something that we have already done as well ... It's not like you're saying, "Gee, wouldn't this be a neat idea to build one of these? Let's go design something." This is something that's a straight-line derivative off of what is an established competency, and then meeting the requirements unique to the United States, as we have already done.

This is not designing a new high-performance jet aircraft, this is not suspending laws of physics, it's not trying to use some creative unique material called unobtainium or anything else. This is just a straight-line derivative of a commercial capacity. We have two extremely competent aerospace giants that are both global in their orientation who know how to design and build commercial aircraft. This is straight up, and that's the reason why this is such a big debate ... Our competitor is as global as we are. They do as much international global sourcing work as we do. And so we get two comparable aerospace companies that know how to do this stuff, and that's what's made this such an interesting thing to watch.

This is a formulaic process. It is mechanistic, it is specified very clearly. There are 372 requirements -- you either meet them or you don't ... So the amount of effort we're putting into the public dialogue, the debate, the normal relationships you have to have with other decision-makers in Congress and on Capitol Hill and in the administration and elsewhere is ongoing, but there isn't a concerted campaign to sit back and say, "Boy, we've got to go out and get XYZ ad company that sold the best soap model last year to come out and try to help us burnish our image." Our image will be established on the basis of whether we perform, meet what we said we were going to do and if it operates like we said it would.

In terms of the focus of what I looked at from the beginning ... part of the corporate aspiration is to move more into the service market. When you define the overall market requirement for any individual asset or product -- if the business textbooks are to be believed -- 40 percent of the product is the platform sale. The other 60 percent is the aftermarket service, logistics, supply, support, all that stuff. We do some in that area, but we're really looking at a whole lot more ... That's the best guarantee that when there's an opportunity to replace that asset, they're going to want to talk to you about doing so in the future.

I think dominantly the growth is going to be government ... Another attraction that's a big feature of our own corporate strategy here is a very clear expression on the part of the Defense Department and the administration overall that the Weapon Systems Acquisition Reform Act is here to stay -- that it emphasizes competition at every turn, that you have to justify it when you're not going to have competition.

The U.S. defense budget is slightly smaller than all other defense budgets of all other allied nations in the world. It's still a big, big market. The projected spending for the next 10 years ... suggests it's relatively flat-lined over the course of that time . . . That's basically saying, "Gee, since there is no growth. I'll walk away from half the market in the world." I don't think that logic makes any sense.


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