The Slow Death of American Aerospace Prowess

For the past couple of years we have been watching American automakers slowly being bled to death by the advance of evermore stringent environmental standards (not that I don't like clean air), unions with eyes for short term gratification, and the quality driven foreign manufacturers. On the face it looks as though a few are getting rich of  the backs of the many, but in reality the the big US automakers are staying barely out of the ditch due to the sales of automobiles in foreign markets. But now the Big Three are lobbying congress for a $50 billion in loans so they can compete, says an editorial in the Wall Street Journal by Holman W. Jenkins, Jr.  The reason they say is because of environmental standards placed on the cars they make which have strangled production in North America. Well, that's not the whole reason. If one looks back through the years one can see a slew of sweetheart deals handed out by state governments for foreign automakers designed to bring jobs. In 1984 Mitsubishi got $249 million from Illinois. In 1992 BMW got $150 million to locate in South Carolina and another $80 million in infrastructure improvements. Alabama secured a Mercedes plant with  $258 million in 1993. The list goes on and on, and long term planning has taken a back seat to shifting short term gains in to high gear.

What does this have to do with aerospace, you ask?

Well it isn't going to be long before Boeing, one of the largest employers in the Northwest, finds itself riding shotgun to foreign airplane builders. Recently the International Association of Machinists decided to walk. Management at Boeing probably does't see this as troubling as long as the strike doesn't last for over four months. According to one economist, the last two strikes, one in 1995 that lasted 69 days, and one in 2003 that lasted 24 days, hardly registered on the economic radar. No big deal, right?

Wrong. For a few years Western firms have been helping Chinese airplane manufacturers get off the ground. Recently China has begun test flights of a new domestically produced regional aircraft. The company, Xi'an Aircraft Industry (Group) Co Ltd, a subsidiary of state aircraft maker AVIC I, said it will be able to produce 10 to 15 of the 60 seater Turbo-Fan MA 600 by 2010, and hope to be able to build 30 per year by 2012. And after that, they're going to be gunning for the big birds. In a country that doesn't have environmental controls and no unions, it is only a matter of time before Boeing and Airbus, a classic duopoly, are going to be in a dog fight with a rival who surely will have the competitive advantage-namely low wages, and less government interference. 

Todays take-away: American companies, workers and governments had better start looking to a more distant horizon because pretty soon the friendly skies aren't going to be so friendly.