The venture – Areva Newport News LLC – will emanate from a $360 million investment, and will lead to the construction of a 300,000-square-foot production-and-engineering facility, the two companies said yesterday (Thursday). It will employ 500 workers when completed in 2011, according to an MSNMoneycentral report.

Mike Petters, president of Northrop Grumman Shipbuilding, the unit that has signed on to work with Areva, told The Wall Street Journal that “we’ve watched manufacturing wane in shipbuilding and we’ve watched for other opportunities to go into adjacent areas…We think a nuclear renaissance is coming and we have the work force.”

The facility will promote U.S. market sales of Areva’s “evolutionary power reactor,” or EPR. Areva is seeking to get the reactor design certified by the Nuclear Regulatory Commission (NRC) for use in the U.S. market, The Journal reported.

The deal is also the latest illustration that commercial nuclear power – which has been on a more or less permanent hiatus in the U.S. market since the 1979 near-meltdown at the Three Mile Island nuclear powerlant near Harrisburg, Pa.— may finally be making a comeback in the energy-starved U.S. market.

There hasn’t been a single new nuclear plant built since the Three Mile Island accident; this new manufacturing facility will be the first of its kind built in this country in 35 years, the Newport News Daily Press reported.

The state-run Areva is trying to compete in an industry in which Japanese firms – such as  Hitachi Ltd. (ADR: HIT) and Toshiba Corp. (OTC: TOSBF), have come to play a large role. No surprise, too, that China is building up its nuclear capabilities, and has global objectives for that business.

“Our target is 80% U.S. content” for U.S. nuclear power plants, Anne Lauvergeon, chief executive of Areva, told  The Journal. Lauvergeon believes Areva’s linkup with Northrop will give the French company a competitive advantage over rivals that are more reliant on imported goods. That’s why she said that she’s emphasizing the need to have 80% of the content for U.S. reactors to be built domestically.

Orders from U.S. nuclear operators could top $100 billion in coming years, and some are hoping that a wave of nuclear construction could also bolster the U.S.’s ailing manufacturing sector.

Areva’s Lauvergeon said her company’s existing heavy manufacturing facility at Chalon/Saint Marcel, France, is operating at capacity with a five-year backlog of orders. Nucelar plants built with Areva’s design are under construction in France, Finland and China. Three U.S. utilities have selected Areva’s design including Constellation Energy Group Inc. (CEG), PPL Corp. (PPL) and Ameren Corp. (AEE).

With its decision to invest so heavily in the U.S. market – and to involve a partner – it’s clear Areva is highly confident that plans to build new nuclear plants in North America will move forward, The Journal reportedSource: French Nuclear Giant Areva Links Up With Northrop in Groundbreaking Production Venture

More from today’s Money Morning…

Just one day after The Boeing Co. (NYSE:BA) was notified that a multi-billion-dollar U.S. Air Force tanker competition has been put on hold, the embattled aerospace firm said it was steeling itself for a long strike by its hourly work force.

Boeing’s commercial aircraft production areas were quiet Monday after the manufacturer’s 27,000 machinists walked off the company’s jetliner assembly lines to protest a proposed labor contract they contend falls far short of what’s fair in terms of health-care benefits and job security, MarketWatch.com reported.

On Wednesday, Boeing Chief Financial Officer James A. Bell said the company expects the strike to last at least 30 days and said the job action will cause additional delays in its vaunted 787 Dreamliner commercial jet, the Seattle Post-Intelligencer reported.

“I think there’ll be at least a one-month delay,” Bell said Wednesday at a Morgan Stanley (NYSE:MS) conference Webcast from Dana Point, Calif. “Right now, it’s a one-for-one day slip on the 787 and all other programs as well.”

The International Association of Machinists and Aerospace Workers Union continued its tough talk.

“We will continue this fight ‘one day longer’ than the company can afford until they meet our demands,” the union told its members via a late-Sunday posting on its Web site, the P-I reported.

Tom Buffenbarger, the union’s national leader, told The Seattle Times that if the strike costs Boeing $100 million a day in lost sales, as many Wall Street analysts predict, it will take strikers one month and a week to drain the company’s $10 billion cash reserve.

As of now, no new talks have been scheduled.

With the Dreamliner program already 14 months or more behind schedule, the strike now puts in jeopardy Boeing’s plans to test-fly the jet in November and to start deliveries in the third quarter of 2009. Parts shortages and supplier issues have created delays. Boeing has distributed production of the airplane throughout the world.

While conceding that there are still “significant issues” between Boeing and the union, Bell, the company CFO, said “we’ll never get to a complete impasse.”

Although the dispute over the use of outside contractors to perform work that union workers have done in the past is the main sticking point, Bell noted that it’s also “not the only issue we’re apart on.”

On Aug. 28, Boeing offered the employees who make parts and actually assemble the jet aircraft a wage-and-benefits package that includes an 11% raise over three years, bonuses, and a 14% improvement in retirement-pension payments. Boeing also shifted healthcare costs to workers via higher co-pays and medical deductibles.

But the union wanted a 13% raise.

Source: With Tanker Deal Shelved, Boeing Must Dig in For Possible Long Strike

• Japan’s wholesale inflation remained near a 27-year high in August, the government said yesterday (Wednesday), as the index for domestic corporate goods prices rose 7.2% from a year ago. The index measured a revised 7.3% increase in July.

• The Defense Department has deferred its decision on a $35 billion tanker contract to the next administration, further delaying the heated competition between The Boeing Co. (BA) and Northrop Grumman Corp. (NOC). Defense Secretary Robert Gates said yesterday (Wednesday) that he decided to cancel the current round of bidding because the complexity of the project and the friction between the two companies, The Associated Press reported.

• Citigroup Inc. (C) has taken a $450 million pretax hit so far this quarter due to its exposure to the troubled mortgage finance companies Fannie Mae (FNM) and Freddie Mac (FRE), the company said in a filing with the Security Exchange Commission. Citigroup said its total exposure to preferred shares of Fannie and Freddie is now about $50 million, down from about $1 billion on June 30, 2008.

• Consumer price inflation in China fell for the fourth consecutive month in August, Beijing said yesterday (Wednesday). Consumer inflation was 4.9% last month, down from 6.3% in July, However, factory price inflation edged up to 10.1% in August.

• ImClone Systems Inc. (IMCL) received a $6.1 billion takeover offer yesterday (Wednesday), ImClone Chairman Carl Icahn announced. He refused to disclose the interested party, saying only that a “large pharmaceutical company” outbid Bristol Myers Squibb Co.’s (BMY) unsolicited offer, Bloomberg News reported.

• Bank of America Corp. (BAC) yesterday (Wednesday) announced it would buy back $4.5 billion of illiquid auction-rate securities in order to settle an investigation by Massachusetts’ state regulators. The repurchase will affect approximately 5,500 Bank of America retail customers nationwide, Reuters reported.

• France’s Sanofi-Aventis SA (ADR: SNY) announced yesterday (Wednesday) that it had appointed Chris Viehbacher, former head of GlaxoSmithKline PLC’s (ADR: GSK) North American drugs business, to replace Chief Executive Officer Gérard Le Fur as of Dec. 1. The management change at Sanofi-Aventis stems from conflicts with Chairman Jean-François Dehecq, the International Herald Tribune reported.

• Royal Dutch Shell PLC (ADR: RDS.A, RDS.B) yesterday (Wednesday) announced it was evacuating personnel from its Gulf of Mexico oil platforms as Hurricane Ike makes its way towards the Texas coast. Ike is expected to hit land early Saturday after passing through the Gulf of Mexico, home to most U.S. oil refineries, the AFP reported.

Source: Global Investing Roundups Thursday, September 11th, 2008

The Chicago-based Boeing said it wants the extension to incorporate what the aerospace giant contends are essentially new requirements calling for a bigger tanker with a larger fuel-carrying capacity. The Pentagon has told the bidders it will grant two months for the bidders to assemble and submit their new proposals, a Boeing official told the Atlanta Business Chronicle.

“If we’re unable to secure sufficient time to prepare a competitive proposal, there’s little option for Boeing other than not to submit a bid,” Boeing spokesman Dan Beck told the Georgia-based business journal.

This latest development in the politically charged competition for the aerial refueling tankers could push out the delivery date for the much-needed aircraft by another year. But it is also expected to give Boeing more time to build up political support for its new bid, MarketWatch.com reported.

Back in February – in what some industry experts viewed as a surprise decision – Boeing lost the initial contract to a partnership of the Los Angeles-based Northrop Grumman Corp. (NOC) and Airbus SAS, Boeing’s arch-rival in the commercial jetliner business and a subsidiary of the European Aeronautic Defense and Space Co. NV (EADS).

Boeing had offered the Air Force a militarized version of its 767-200ER jetliner platform, but the Air Force opted for Northrop Grumman’s larger Airbus A330 model instead. The bidding process was subsequently reopened when Boeing won a protest with a government watchdog agency after government auditors found “significant errors” in the Air Force’s decision, Forbes.com reported.

Since that time, the Air Force has repeated it prefers an aircraft that can hold more fuel and cargo such as the A330 – essentially leaving the contract open for Northrop to grab as Boeing is forced to scramble to find a replacement aircraft it can use as the basis for an aerial tanker. Boeing’s 777 model is likely too costly because of the high demand from commercial airlines, while its 767-400 would require improvements in both flight range and endurance, said Teal Group analyst Richard L. Aboulafia.

By threatening to pull out of the bidding process, Boeing has established a basis for another protest, Lexington Institute defense-industry expert Loren Thompson told MarketWatch.

“Boeing’s real point here is that the government has changed its requirements for a tanker, so the company needs more time to modify its proposal,” Thompson said. “By putting it the way they have, they have set it up for a formal protest. [After all, why would the company want to] spend millions of dollars on ads and lawyers and question their customer’s decision if they just intended to drop out?”

The tanker contract is a pivotal one for both the military and the defense industry.

The Air Force is desperate to begin replacing its KC-135 Stratotankers, which date back to the Eisenhower-era, are literally falling apart, and have become prohibitively expensive to keep operating. As weapons systems go, the aerial tanker isn’t a luxury: Through the use of aerial refueling, Air Force fighters and bombers can remain aloft for long periods, and can make long-range flights from U.S. bases to hot spots anywhere in the world. The tanker fleet provides a particular advantage when geopolitical flare-ups occur in regions where the U.S. military has no nearby operational bases.

The Boeing and Northrop Grumman/Airbus teams are each desperate to win the tanker deal because – in an era of fiscal uncertainty – it’s one of the last really large aircraft contracts that’s even visible on the horizon. Although the deal’s initial value is $35 billion, some analysts estimate the ultimate value could end up closer to the $100 billion mark if all the needed tankers are eventually built.

Whether it’s through a delay via protest, or by gaining six more months to revise its proposal, some analysts say that Boeing is also pushing out the contract to be awarded under a possibly more friendly Democratic administration whose appointees might be more sympathetic to its cause.

Washington state – where Boeing does much of its U.S. production work – is a Democratic state, while Alabama, where the Northrop Grumman tankers would be assembled, is largely Republican.

That’s an assessment that defense-policy analyst Lawrence Korb just doesn’t buy.

“A new administration won’t change anything because [procurement] rules are rules,” Korb, an analyst with the Center for American Progress, told MarketWatch. “Politics only enters in after you award the contract.”

There’s also the issue of foreign competitiveness.

At a time when the U.S. defense-industrial base is consolidating and contracting, there are also concerns that a foreign aerospace company could be such a large beneficiary from this defense deal: That’s especially true since those benefits will clearly bolster the civilian jetliner business that’s operated by Airbus – which competes directly with Boeing’s commercial airliner business – at a time when long-term global growth is expected to generate billions of dollars in new orders for commercial jetliners.

Source: Boeing Threatens to Pull Out of $35 Billion Air Force Tanker Program

“I’ve concluded the contract cannot be awarded at present” because of flaws found by the Government Accountability Office, Gates said at a press conference at the Pentagon yesterday, Bloomberg News reported. The new bidding process will reexamine eight of Boeing’s complaints that were upheld by the GAO, out of more than 100 concerns it had initially raised, by seeking “revised proposals from the industry,” he said.

Last month, the Government Accountability Office backed a petition brought by Boeing that the U.S. Air Force altered the auction for a $35 billion aerial-tanker contract – a bid that went to a joint-venture of rivals Northrop Grumman Corp. (NOC) and Europe’s EADS NV (PINK: EADSY), and in turn, helped push Boeing’s stock down more than 11% at the time.

Boeing filed the complaint in early March, claiming that the Air Force misled the company and modified its specifications to accommodate models made by Northrop and Airbus S.A.S.

The GAO found that there were discrepancies in the bidding process and recommended the Air Force re-conduct the bidding. However, GAO rulings are only advisory in nature, and the Air Force did not have to comply.

The Air Force was given 60 days to respond to the GAO’s ruling, and the speedy decision is seen as a good sign for Boeing.

With an initial contract value of $35 billion that could easily grow to $100 billion or more over time, both sides have fiercely contested the bidding process.

“EADs feels very raw over this,” Alexandra Ashbourne, who heads Ashbourne Strategic Consulting in London, an aerospace analysis firm, told The New York Times. “There was a lot of effort expended for no return. You cannot underestimate how raw and burnt they feel as a result of all this.”

But its partner, Northrop Grumman, remains confident of eventual success, despite the delays.

Northrop Grumman is “reviewing the decision to ensure the re-competition will provide both companies a fair opportunity,” company spokesman Randy Belote said in a statement, Bloomberg News reported.

“The United States Air Force has already picked the best tanker, and we are confident that it will do so again,” Belote added.

[Editors Note: To read a related story on Boeing’s recent prediction that aircraft sales will exceed $3.2 trillion over the next 20 years, click here.]

Source: Second Chance for Boeing as Defense Department Reopens Bidding on $35 Billion Contract

Shares of the world’s No. 2 commercial jetliner-maker soared $3.53 each, or 4.49%, to close at $82.09 because of Boeing’s record backlog and a bullish outlook for next year. Earlier yesterday the shares touched $83.36, the biggest increase since June 2006.

Investors had pushed the stock down 15% in the quarter over worries about delays in the “Dreamliner” jetliner program, and the surprise loss of a $35 billion U.S. Air Force tanker contract to a team that included Airbus and U.S. defense contractor Northrop Grumman Corp. (NOC).

Boeing is one of the companies that Money Morning has written about repeatedly, having identified it as a so-called “Global Titan” – a company that’s positioned to capitalize on worldwide trends and that derives the bulk of its sales and profits from such fast-growing overseas markets as China. Jetliner deliveries rose 8.5% last quarter, with almost two-thirds getting delivered overseas.

Profit from continuing operations rose to $1.21 billion, or $1.61 a share, from $873 million, or $1.12, a year earlier, the Chicago-based Boeing reported. Sales advanced 4.1% to reach $16 billion. The results beat the average estimate of $1.35 per share, according to a survey of 20 analysts conducted by Bloomberg News.

Profit for 2009 will be $6.80 to $7 a share on sales of as much as $73 billion, Boeing said in its first forecast for 2009. That projection also exceeded expectations: Analysts had predicted that profits would increase from about $5.93 a share this year to $6.87 next year – even after about a dozen estimates had been slashed after Boeing announced another delay in its 787 Dreamliner program, the third time the airliner maker has pushed back the scheduled first flight for the high-tech commercial jetliner. But the company announced a record backlog.

“We are encouraged that they added to the backlog in the first quarter,” Eric Marshall, research director at the Dallas-based Hodges Capital Management, said in a Bloomberg Television interview. Delays to the 787 Dreamliner program, which dragged down Boeing’s stock price this year, have “created an attractive opportunity for long-term investors. We think the stock could go back above $100 over the next year,” which is why Hodges is adding to its Boeing position of 330,000 shares.

From yesterday’s close, a move to $100 would represent a return of 22%. And that doesn’t include income from Boeing’s current dividend yield of 1.95%.

Weak Greenback Stings Airbus

With a decline in the greenback of nearly 9% so far this year, Boeing has gained an advantage over its bureaucratic European rival, Airbus. Most of Airbus’ costs are euro-denominated, while Boeing’s sales are conducted chiefly in dollars.

Airbus, currently the world’s biggest maker of commercial aircraft, said it’s raising the price of its planes in response to the dollar’s decline against the euro, and to offset an escalation in metal prices fueled by the ongoing global commodities boom.

The list price of the single-aisle Airbus A320-series jet will rise by an average of $2 million as of May 1, while twin-aisle airliners will typically cost $4 million more, the Toulouse, France-based Airbus said Tuesday.

“The price increase is mainly triggered by the weak U.S. currency and the overall increase of the world’s raw-material prices, especially with regards to metal,” Airbus said.

The falling dollar hurts earnings at both Airbus and its parent company, European Aeronautic, Defence & Space Co., when revenue from dollar-denominated aircraft sales is “translated” into, or converted into, European euros.

Metal costs also have crimped profits, as the price of aluminum alone has soared 28% just this year, due to supplies constrained by rising purchases in China, and shortages of energy needed to make the lightweight metal.

Conversely, a weakening dollar makes foreign purchases of Boeing aircraft cheaper – almost as if the buyers are getting a price cut. But since Boeing doesn’t have to convert those dollars into a different currency, the “price break” buyers are getting has no effect on its revenue or profit.

Boeing also is getting a boost as carriers such as Continental Airlines Inc. (CAL) buy more of the U.S. airplane-maker’s Boeing 737-class jet to replace older, less fuel-efficient aircraft to reduce the effect of record oil prices. Unfilled commercial orders rose to an unprecedented $271 billion.

Boeing Chief Executive Officer W. James McNerney Jr. had held back his annual forecast until yesterday to learn more about delays in the Dreamliner, which is at least 14 months behind schedule and won’t enter service until late 2009.

Boeing said that its commercial sales rose 8% to reach $8.16 billion, generating a 39% jump in operating earnings, while Boeing’s military business saw sales fall 1.8% to reach $7.58 billion, even as profit increased 10 percent. Boeing is also the second-largest U.S. defense contractor, trailing Lockheed Martin Corp. (LMT).

Boeing said today it expects to deliver 500 to 505 airliners in 2009 – up from as many as 480 this year. Asia is expected to be a major market going forward, as will be China. Consider that:

• The global demand going forward is almost beyond belief. China alone will require 3,400 new airplanes worth about $340 billion over the next 20 years – an average of $17 billion annually. And that doesn’t include other Asian markets, such as Vietnam, which will need to modernize their air fleets as they commercialize their commodities.
• The Vietnam deal announced in November is worth $1.9 billion.
• In fact, over the next two decades, Boeing has forecast that air carriers worldwide will need to acquire 28,600 commercial aircraft – with a value of $2.8 trillion.

Boeing spent $1.2 billion last quarter to buy back 15.6 million shares, part of a $7 billion repurchase authorization. Thirteen of 24 analysts in a Bloomberg survey recommend the company’s stock; nine say to hold it, and two recommend selling.

Founded in Seattle by timber millionaire William E. Boeing back in 1916, the company got its start building seaplanes and operating a series of air transport services. In 1933, Boeing built the world’s first true commercial airliner, the Boeing 247, which was all metal, instead of the conventional wood, fabric and metal construction of that time.

But the company really came to prominence in the late 1930s, in the depths of the Great Depression, when it made a bet-the-company decision to develop a long-range Army Air Corps bomber on spec. The four-engined aircraft was so impressive that an awestruck newspaperman dubbed it the “Flying Fortress.” The name stuck. That airplane was the Boeing B-17, a heavy bomber without which most experts say the Allies might never had defeated Germany in World War II.

With the arrival of the jet age in the 1950s, the company risked its own capital to develop what eventually became the Boeing 707, a jetliner that leapfrogged offerings from Great Britain’s De Havilland, France’s Sud Aviation and Russia’s Tupolev – and revolutionized jet airliner travel in the process. A subsequent model, the 737, is the best-selling commercial jet ever. Boeing’s double-decked, humpbacked 747 “Jumbo Jet” debuted in the late 1960s, and opened the door to true intercontinental travel.

Since World War II, Boeing has also been a heavyweight in the defense-aerospace sector, building long-range bombers, aerial tankers, missiles, and helicopters, among other weapons systems. The military-contracting business has helped Boeing through periods in which there might have been a lull in the commercial side of the company’s business.