An aerospace boom, if you can keep it

  • Posted: Sunday, August 31, 2014 12:01 a.m.
The Boeing Company campus in North Charleston. (Grace Beahm/File)



Boeing's decision five years ago to open an assembly plant in North Charleston - the first major airplane factory built in this country in more than 50 years - was driven by several factors, including the assumption that first, South Carolina was a hospitable place in which to locate aerospace manufacturing; and second, that Boeing's significant investment in this state was justified by a strong and growing export market for the commercial airplanes to be manufactured here.

The first assumption proved correct and then some - as aerospace companies have since flocked to, and flourished in, this state. According to a study released last month by University of South Carolina's Darla Moore School of Business, the growing aerospace industry helped this state weather the Great Recession, supports between 100,000 and 120,000 jobs, generates $17 billion to $22 billion in annual economic activity, and sends more than $530 million in tax revenues to the state treasury every year.

At this rate the study's author concluded that aerospace will become "a major pillar of the South Carolina economy." What South Carolina's secretary of commerce called the "Boeing Boost" played a significant role. Boeing is now one of the 10 largest employers in the state and our workers make up nearly 40 percent of the 17,000 people employed here by core aerospace companies.

This illustrates the outsized economic impact of aerospace manufacturing, which remains a relatively small share of the U.S. and South Carolina economy but has a disproportionate impact on job growth because of the engineering services, supply chain and other support that our industry requires.

But the investment that Boeing and other aerospace companies are making in South Carolina can only be sustained if we are able to sell our products effectively - and fairly - in a highly competitive global market.

Roughly 80 percent of all Boeing airplanes - and a significantly higher percentage of the Dreamliners made in North Charleston - are delivered to international customers. Recently, Boeing reached 1,000 orders booked for the 787 and we also recently announced that the 787-10, the largest of the Dreamliner family, will be manufactured exclusively in South Carolina.

Unfortunately, political dysfunction in Washington, D.C., now threatens the growth and prosperity Boeing and South Carolina have achieved together. Some members of Congress - including Reps. Jeff Duncan and Mick Mulvaney - want to cripple, if not kill outright, the U.S. Export-Import Bank. This is an important tool for American exporters, including many small and mid-size companies that are gaining footholds in markets outside the United States for the first time. Nearly 90 percent of Ex-Im transactions last year involved small American companies.

The Ex-Im Bank provides loan guarantees and insurance to facilitate sales when commercial financing is not available. Its strict vetting policies combined with the substantial fees associated with Ex-Im financing mean that the bank consistently runs surpluses that are returned to the U.S. Treasury - more than $1 billion in 2013.

Ex-Im is critically important to Boeing, our 168,000 employees, and our more than 15,000 U.S. suppliers because of the central role export credit plays in the global market for commercial airplanes. Major airplane contracts can run into the billions of dollars and for a variety of reasons - geopolitical instability, tight credit markets - commercial financing may not be available for even credit-worthy airlines. The role of official export credit is to be a financing guarantor of last resort, which gives customers confidence that they will be able to pay for the airplanes they have committed to purchase.

Contrary to what has been claimed by some critics, foreign airlines buying American-made planes are gaining no competitive advantage over domestic carriers as a result of the U.S. Export-Import Bank. Official export credit is at least as expensive as commercial finance; and interest rates for Ex-Im-backed loans are significantly higher than the rates paid by U.S. carriers to buy new airplanes.

Currently Boeing's major competitor for nearly every major international sale is Airbus, which is supported by three export credit agencies. Emerging commercial airplane makers from Russia, China, Canada and Brazil - also supported by government export credit - will eventually compete for global market-share as well.

I dealt with these marketplace realities firsthand as vice president for sales at Boeing Commercial Airplanes until 2012. As president of Commercial Airplanes today I am already hearing about potential customers worried that Ex-Im will not be there in the future - customers that may buy Airbus airplanes made in Toulouse, France, instead of Boeing airplanes made in Puget Sound, Wash., and North Charleston, S.C.

Without congressional re-authorization the U.S. Export-Import Bank will expire at the end of this month. South Carolina's governor, U.S. senators, and all but two of its House members understand the damage this would do the state's growing but still nascent aerospace sector - and to Boeing's ability to keep manufacturing airplanes for export at the Charleston plant.

We hope that Congressmen Duncan and Mulvaney will do the right thing for this state's economic future and vote to re-authorize the bank.

Ray Conner is vice chairman of The Boeing Company and president and chief executive officer of Boeing Commercial Airplanes.

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