INTERVIEW, UPDATE 1-EADS still looking for smaller U.S. buys

* Growing drive to expand toehold in U.S.

* U.S. non-Airbus sales to reach $1.7 bln in 2009 (Adds byline, additional material on helicopters, tankers)

WASHINGTON, March 13 - Europe's EADS is continuing to search for modest acquisitions in the United States as part of its ongoing drive to increase its presence in the U.S. defense market, said Ralph Crosby, chief executive of EADS North America, told Reuters in an interview.

EADS, the parent company of plane maker Airbus, in January said it had abandoned a "significant" acquisition in the United States to conserve cash, given uncertainty about how the global economic downturn would affect jetliner sales.

"This was a timing issue, rather than anything else," Crosby said, referring to EADS' decision to abandon the U.S. acquisition last November. "The climate was so uncertain then that being able to spend 20 percent of your cash was probably inappropriate at the time."

EADS ended 2008 with cash reserves of 9.2 billion euros.

Smaller deals, valued at up to around $500 million, were still a priority, Crosby said, noting EADS Chief Executive Louis Gallois had made clear when the other deal was abandoned, that U.S. acquisitions remained a key area of interest.

EADS suffered a big setback in its drive to expand in the U.S. defense market when the Pentagon last year canceled a $35 billion deal for new aerial refueling aircraft that EADS won with prime contractor Northrop Grumman Corp, beating out Boeing Co.

But Crosby said he was confident the Northrop-led team and its A330-based tanker would win again when the Pentagon launches a fresh competition in coming months.

Crosby declined comment directly on congressional moves to split the planned purchase of 179 aircraft between Boeing and Northrop, but said his company stood ready to support Northrop and the U.S. government whatever was decided.

DRAMATIC EXPANSION IN SALES

Crosby said EADS had already dramatically expanded its toehold in the U.S. market by selling more helicopters and other equipment, but was still looking for some well-placed acquisitions to expand its portfolio.

EADS was mainly looking at companies active in the defense electronics sector, sensors, communications, training and high-end services, Crosby said, but gave no further details.

"We're looking for reasonably modest levels of buys, half a billion, that kind of thing," he said, noting that EADS cash reserves now offered a "fair cushion" and would allow the company to take advantage of much lower valuations.

Crosby said EADS non-Airbus sales in the United States would reach $1.7 billion in 2009 from $1.3 billion in 2008, four times more than the $400 million reported six years ago, when Crosby first joined EADS.

Back then, the European company faced an uphill struggle selling equipment to the U.S. government, but these days, it is viewed as a solid business partner, Crosby said.

He cited the company's on-time, on-schedule deliveries of 57 light helicopters to the Army, plus work for the Coast Guard and on other weapons deals, adding, "Our reputation is solid."