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Thursday, July 20, 2006 - Page updated at 12:00 AM

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Boeing CEO McNerney wrong on tankers, EADS says

Seattle Times aerospace reporter

The top U.S. executive for Airbus' parent company, European Aeronautic Defence & Space, said Wednesday that Boeing Chairman and Chief Executive James McNerney was "just patently wrong" in asserting EADS isn't subject to certain burdensome U.S. regulatory requirements.

EADS wants to compete with Boeing for a lucrative contract to build an eventual 500 refueling tankers for the U.S. Air Force.

McNerney, in a Seattle Times interview at the Farnborough Air Show, had said Boeing is at a disadvantage in the contest because it must comply with the federal International Traffic in Arms Regulations (ITAR) laws that govern control of exports of military items, and the Foreign Corrupt Practices Act, which requires transparent business practices by U.S. companies overseas to discourage bribing of foreign officials to win contracts.

Ralph Crosby, chairman and chief executive of EADS North America, reacted with some anger Wednesday. "I really have a lack of understanding [of McNerney's argument], and maybe he does," he said.

Crosby pointed out that on the tanker bid, EADS is a subcontractor to prime contractor Northrop Grumman of Los Angeles, which is subject to all U.S. legislation.

In addition, he said, EADS is the largest single purchaser of U.S. aerospace parts, buying $8.5 billion worth in 2005. On those parts as well, "we're governed by ITAR," Crosby said.

"With regard to issues of transparency, I really don't understand what Mr. McNerney is referring to," Crosby said. "EADS operates by a strong code of conduct and quite frankly we find it unusual to have it suggested otherwise."

As to controlling military exports, he recalled that Boeing was fined $15 million in April for ignoring a State Department directive and exporting to China dozens of 737s containing a tiny gyrochip that had been developed for missile guidance.

Crosby said that, in contrast, Airbus complied with the State Department order to hold its commercial sales to China containing the tiny U.S.-made gyrochip.

"We stopped the shipments of the airplane and stopped sales of the airplane until we found a replacement part," Crosby said.

"We are squeaky clean. We abide scrupulously by ITAR," he said.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

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