Boeing Just Lost a Huge Defense Contract Thanks to Ed Snowden
About $4 billion. That’s how much Edward Snowden just cost defense contractor Boeing. After a lengthy courtship with the Brazilian government, Boeing looked set to sell 36 F-18 fighter jets to the Brazilian Air Force. The value of that contract was said to be about $4 billion, a figure that would only have increased once ...
About $4 billion. That’s how much Edward Snowden just cost defense contractor Boeing.
After a lengthy courtship with the Brazilian government, Boeing looked set to sell 36 F-18 fighter jets to the Brazilian Air Force. The value of that contract was said to be about $4 billion, a figure that would only have increased once maintenance costs and other purchases were taken into account. But the deal was potentially much larger than that, the F-18 sale was a way for Boeing to get its foot in the door with a friendly military looking to expand and grow its clout. Reuters called the deal "one of the developing world’s most sought-after defense contracts."
Instead, Boeing lost out to Swedish defense contractor Saab and its Gripen NG fighter jet. It might mark the first time a Gripen will ever beat a Hornet in a dogfight.
But if Boeing is looking for a fall-guy, look no further than Snowden. While Brazilian officials claim in public that the decision to award the contract to the Swedes had mainly to do with Gripen’s lower price and Saab’s willingness to transfer technology to Brazilian firms, in private they concede that revelations about U.S. intelligence gathering in Brazil made it all but impossible for Brazil to buy an American fighter jet. "The NSA problem ruined it for the Americans," a source in the Brazilian government told Reuters.
Price was undoubtedly a factor in the Brazilian decision to accept Saab’s offer. The Gripen — Swedish for "griffin" — is on the cheap end of fourth-generation fighters, a claim Saab trumpets, calling it the cheapest advanced fighter jet on the market when factoring in operational and logistical costs. Brazilian President Dilma Rousseff has come under fire this year for the huge infrastructure projects her government has embarked on in preparation for the World Cup next year and the Olympics in 2016, so it’s possible her government was reluctant to spring for the more expensive U.S. fighter jets.
But had it not been for the Snowden revelations, Brazil would probably have tapped Boeing for the project. Vice President Joe Biden visited Brazil in June and lobbied on Boeing’s behalf, leading most observers to conclude that the Chicago-based aerospace firm had the deal all but wrapped up. "If it’s Boeing, Biden will deserve much of the credit," Brazilian official told Reuters at the time.
But then came the revelations that the NSA intelligence-gathering operation had gone so far as to intercept messages between Rousseff and her aides, in addition to spying on Brazilian oil giant Petrobras. Those revelations touched off a political firestorm in Brazil, leading Rousseff to cancel a state visit to Washington, and to champion an effort at the U.N. to codify privacy rights.
Boeing said in a statement that they were disappointed with the decision, but that’s obviously an understatement. The company had opened up a huge corporate office there and had hired a former U.S. ambassador to Brazil as its point-person in the country. It reported last quarter that revenue from military aircraft was down 5 percent to $3.5 billion, though the company noted a surprising 12 percent profit jump. With defense budgets in the United States shrinking, a major contract in the developing world and a foothold in a promising market would surely have been welcome.
But, instead, the Brazilians went with the Swedes’ bargain-bin fighter. In Stockholm, they will be toasting to Snowden tonight.
Meanwhile, the Snowden effect continues to rack up victims.