Boeing Co, the world's largest aerospace company, agreed to cut the price of jet fighters sold to South Korea by US$239 million to US$4.23 billion, lower than that offered by its main rival Dassault Aviation SA of France.
Boeing also agreed to shift production worth US$3.56 billion to South Korea, amounting to 84 percent of the total value of the F-15K program, meeting the government's 70 percent requirement, the Ministry of National Defense said.
PHOTO: REUTERS
South Korea last month awarded Boeing the exclusive right to negotiate for the order of 40 jet fighters. Boeing's initial offer included investing at least US$2.9 billion, or 65 percent, of the contract value in the country.
"When we started the negotiations, we had aimed to lower the price to a level offered by Dassault, which was US$4.27 billion," said Choi Dong -jin, deputy minister for acquisitions at the defense ministry. "We are satisfied with the result because we got a lower price than what Dassault had offered."
South Korea narrowed the field to Boeing and Dassault in March, basing its final choice on security, political and trade issues.
The selection process was mired in allegations of corruption and irregularities. Dassault had filed an injunction against the government, saying the bidding was rigged in Boeing's favor because of the US-South Korea military alliance.
"The deal ended in [South] Korea's favor as it was able to cut the price to around the level that Boeing had initially offered last year," said Kim Jong Dae, a military analyst at New Strategy Institute of Korea. "But it would have been better if the government had worked harder to lower the price from the start."
Boeing had offered about US$4.25 billion for the jet fighters to South Korea last year before the price was raised to US$4.5 billion last month, the defense ministry said.
The latest amendment added US$668 million to the total amount of work Boeing is committed to complete in South Korea. Most of the increase will be through Korea receiving more software development technology and more engine maintenance work.
"Because the increase is mostly software and engines, we don't see any problem in maintaining operations at our St. Louis plant," said Arthur Park, a spokesman at Boeing.
"There won't be any job cuts as a result of this."
The fighters will be powered by General Electric Co engines.
Of the total package, the transfer of the main jet fighter technologies will amount to US$1.55 billion and production of parts by local manufacturers will be worth US$1.44 billion, the ministry said.
"The technology we will receive [from Boeing] will help our goal to develop our own jet fighter by 2015," the defense ministry's Choi said.
The ministry expects the revised contract to be signed in June. Deliveries are scheduled to begin in 2005.
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