Defense Industry

In a stunning upset that could reshape the nation's aerospace industry, Northrop Grumman Corp. and European partner Airbus were tapped Friday for a $40-billion Pentagon contract to build 179 aerial refueling tankers for the Air Force. Century City-based Northrop upset rival Boeing Co. in a surprising win that analysts said could alter the companies' fortunes and erode the Pentagon's long-standing policy of buying weapons systems made by U.S. companies.

Escalating the fight over the biggest defense contract in years, Boeing Co. said Monday that it intended to challenge the Pentagon's decision to place an aircraft order potentially worth $40 billion with the consortium of Northrop Grumman Corp. and European aircraft maker Airbus. Boeing, the world's largest aerospace company, plans to file a formal protest today challenging what is likely to be the nation's last big new defense contract for at least a decade.

Air Force representatives met last week with the chief executives of Boeing Co. and Northrop Grumman Corp. to voice concern about the vitriolic tone of public statements over a $35-billion program for aerial refueling planes, two sources briefed about the meeting said Monday. The Air Force surprised the industry by awarding the contract for new tankers to Century City-based Northrop and its European partner, EADS. The decision triggered protests from Boeing and its supporters in Congress.

With a bulbous head and plank-like wings, the aircraft resembles a lumbering whale. And its seven-word, 49-letter name -- Broad Area Maritime Surveillance Unmanned Aerial System -- is a whopper. But the award last month of a Navy contract to build the hulking, robotic patrol plane, nicknamed BAMS, could not have come at a better time for Northrop Grumman Corp. and, in particular, its military aircraft business headquartered in El Segundo.

Aerospace giant Northrop Grumman Corp. said Wednesday that it was suspending the hiring of thousands of engineers in Southern California after a ruling by a federal auditing agency left its $35-billion Air Force contract to build aerial refueling tankers in limbo.

The chronically troubled effort to build a new fleet of aerial refueling tankers for the Air Force was delayed yet again after Defense Secretary Robert M. Gates announced Wednesday that the competition that selected Northrop Grumman Corp. was flawed and would be opened for the third time in seven years. The decision is a blow to the Century City-based aerospace giant, which was the surprise winner of the $35-billion contract over archrival Boeing Co. in February.

There are few industries whose fortunes are so closely tied to government as military contractors, companies that provide the Pentagon with everything from fighter jets to janitors. And for the last eight years, business has been very good. But with that government customer now ailing, the boom times are likely to end.

Election day may signal bad news ahead for Southern California's biggest private employers -- aerospace giants Boeing Co. and Northrop Grumman Corp. -- no matter who wins today. With a financial crisis pinching federal coffers and deep cuts in federal spending looming, multibillion-dollar weapons purchases could take a serious hit.

Northrop Grumman Corp. and General Dynamics Corp., the Navy's top shipbuilders, received a $14-billion contract to jointly build more of the latest nuclear-powered submarines. The fixed-price incentive fee contract calls for construction of eight of the Virginia-class vessels, the Defense Department said in a statement Monday. Construction of the submarines by Northrop of Century City and General Dynamics of Falls Church, Va.

There were more challenges to federal contracts in 2008 than in any other year in the last decade as companies fought over fewer multibillion-dollar projects. Though federal auditors found errors in few government decisions, more than $70 billion in military contracts alone were delayed this year because of losing bidders filing protests. More than 1,600 protests were filed by U.S. businesses with federal auditors this year.