Airbus to Assemble Jets in Mobile, Alabama; Start of a Global Labor War?

Airbus is hoping to take US market share from rival Boeing by assembling jets in Mobile, Alabama. Airbus is a French-based company, jointly run by French and German management.

Senator Rick Shelby (Alabama) is supportive of the move. Boeing, as one might have expected, issued complaints of European subsidies, as if US defense contracts don't in essence amount to the same thing. Both sides have complained to the WTO.

Here are a few articles to consider.

Airbus Fires Shot in Labor War

The Wall Street Journal reports Airbus Fires Shot in Labor War

Airbus announced plans to start assembling passenger jets in the U.S. starting in 2015, a move likely to affect labor and trade relations on both sides of the Atlantic.

Airbus outlined the plan Monday at an event in Mobile attended by U.S. suppliers, airlines and politicians, carefully stage-managed amid potential negative reaction on both sides of the Atlantic. EADS shares rose 2% Monday in Paris.

The company said it would create 1,000 jobs at its Brookley Aeroplex in Mobile, doubling the company's U.S. workforce. One assembly-plant job typically supports up to four at suppliers, Airbus said. Parts for the aircraft will be shipped to Mobile from Hamburg, the site of an existing single-aisle Airbus assembly plant.

"We go where the talent is," Airbus Chief Executive Fabrice Bregier said in Mobile ahead of a parade of local politicians welcoming the $600 million investment. He didn't respond directly when asked whether the move would shift employment to the U.S. from Europe. The company's European unions have voiced concern about production moving overseas, according to French media reports.

He said labor flexibility afforded by a union-free facility in right-to-work Alabama helped drive the plan. So, too, did the opportunity to change the balance of dollar-generated revenue with costs that are generated mainly in euros.

About 40% of the average cost of producing Airbus planes is with U.S. suppliers. A senior executive said labor accounts for only 5% of an aircraft's costs.

"We're going to do everything [we can] to create the environment," Sen. Richard Shelby (R., Ala.) said at the Monday event.

Battle for Market Share

Just what are assembly costs in Germany if it makes economic sense to ship parts from Hamburg to Mobile, Alabama for assembly?

Clearly something more is at stake here, and that something is a hope by Airbus to capture more US market share.

But will it? Regardless, expect more battles in the WTO and more battles from unions in Washington state, Boeing's headquarters. Washington in not a right-to-work state and is dominated by unions.

Airbus to Open Factory on Rival Boeing's U.S. Turf

Reuters reports Airbus to Open Factory on Rival Boeing's U.S. Turf

Flanked by local Gulf Coast politicians, top executives from European planemaker Airbus unveiled their plans to build their first U.S. factory -- a move they said that would help them take market share from rival Boeing Co.

The unit of EADS believes that opening a plant in Mobile, Alabama, which will assemble its narrow-body A320 aircraft, will help it take "more than a few percentage points" of market share from its prime rival in the world's busiest aviation market, according to Airbus sales chief John Leahy.

Due to open in 2016 and expected to create some 1,000 jobs, the company said it will be only the second Airbus plant outside Europe that builds its top-selling workhorse jet; the other one is in China.

Airbus currently has a 20 percent market share in the narrow body jet segment in the United States, compared with 53 percent of the market worldwide.

Airbus' announcement drew a lineup of heavy-hitters from U.S. airlines and suppliers, including American Airlines CEO Tom Horton, JetBlue Airways Corp CEO Dave Barger and Goodrich Corp CEO Marshall Larsen.

They arrived to the strains of the rock group Steve Miller Band's 1977 hit "Jet Airliner" -- that homage to Boeing's 707 is something of an anthem for the aviation industry, and Boeing last year hired Miller himself to perform it for workers at its Everett, Washington, factory.

Another Warning to Unions

This is yet another warning to unions. However, they will not hear the message. After all, this is just about "assembly", at least for today. Tomorrow it will be about actual production.

Production is returning to the US, but it sure will not go to California, Illinois, New York and other high-costs states.

Musical Tribute

Clearly this calls for a musical tribute.



Link if video does not play: Jet Airliner

Addendum: Boeing moved its corporate headquarters to Illinois in 2001 while leaving its main production facilities in Washington.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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