Flanked by U.S. Gulf Coast politicians, top executives from Airbus unveiled plans to build their first U.S. factory and said it will help the European planemaker win market share from Boeing Co in the world’s busiest aviation market.
The plant in Mobile, Alabama, is due to open in 2016 and will assemble narrow-body A320 aircraft, said Airbus, a unit of EADS. The facility is expected to create some 1,000 jobs and help the company take “more than a few percentage points” of market share from its prime rival, Airbus sales chief John Leahy said.
Airbus holds 20 percent of the market for narrow-body jets in the United States, compared with 53 percent of the market worldwide.
Even though assembly is a relatively small part of the work of building an aircraft, Airbus is betting that having a U.S. facility will boost its credentials and help it win deals. The Mobile plant will be only the second Airbus has outside Europe that builds its top-selling workhorse jet; the other is in China.
“I think we became American with this,” New York-born Leahy said. “Even if we have been spending $12 billion a year in the U.S. and have 40 percent of our procurement in the U.S., that doesn’t quite make you American in the way an assembly line does.”
Airbus said the new plant had the potential to create 5,000 jobs for Mobile and surrounding areas, as big manufacturing operations tend to lure suppliers and additional jobs.
The Mobile event drew heavy-hitters from U.S. airlines and suppliers, including American Airlines CEO Tom Horton, JetBlue Airways Corp (JBLU.O) 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.
Airbus and Boeing are locked in a tussle at the World Trade Organization, with each accusing the other of receiving illegal subsidies.
“While it is interesting once again to see Airbus promising to move jobs from Europe to the United States, no matter how many are created, the numbers pale in comparison to the thousands of U.S. jobs destroyed by illegal subsidies,” Boeing spokesman Thomas Brabant said in an emailed statement.
SHOT IN THE ARM FOR GULF COAST
Analysts said Airbus’s move could reshape the U.S. aerospace industry and boost manufacturing on the U.S. Gulf Coast. Airbus’s suppliers also welcomed the news.
“It makes all the sense in the world for Airbus to be here,” said David Hess, president of United Technologies Corp’s (UTX.N) Pratt & Whitney unit. “We’re glad they are here.”
Manufacturing has been a relative bright spot for a U.S. economy still struggling to recover from a 2007-2009 recession. However, data on Monday showed activity unexpectedly contracted in June, the first dip in three years.
In building a U.S. factory, Airbus will follow a broader trend in the manufacturing sector of producing goods closer to where they are used.
“There is a wave of replacement of aging aircraft and we have the right product for that, the A320neo,” Airbus Chief Executive Fabrice Bregier told reporters. “So this is clear that producing this aircraft in America is an advantage commercially.”
U.S. Senator Richard Shelby of Alabama and the state’s governor, Robert Bentley, also attended the Airbus event.
The region in the southeastern United States is still recovering from the devastation of 2005’s Hurricane Katrina.
“Something like this just gives us new marketing opportunities, new opportunities to talk to a lot of different aerospace companies,” said Neal Wade, chairman of the Aerospace Alliance, an association of government and business leaders from the states of Louisiana, Mississippi, Alabama and Florida. “You immediately put yourself into a different category.”
While the Mobile operation is an overseas excursion for the European company, many U.S. companies, from General Electric Co to Fortune Brands Home & Security Inc are bringing manufacturing back home after finding that lower wages overseas came with bigger-than-expected costs for logistics, quality control and other expenses.
Boeing has also embraced the trend following years of delays in the launch of its 787 Dreamliner after handing off much of the manufacturing responsibility for the aircraft to outside suppliers.
“As globalization matures, companies have a better understanding of the total costs of full life cycle production and the U.S. offers a number of advantages,” said Jack McDougle, senior vice president at the U.S. Council on Competitiveness and a former Commerce Department official.
YEARS IN THE MAKING
The Airbus announcement culminates a courtship that began in early 2005, when EADS requested information from the city that would ultimately be used to put together a bid package for a $35 billion refueling tanker project that Airbus ultimately lost to Boeing.
The company took proposals from 70 cities in 32 states, but settled on only four, one of which was Mobile. “They wanted to plant their flag deep in American soil,” said Congressman Jo Bonner, whose district includes Mobile.
The relationship between the city and the company continued to develop through tragedy. After Hurricane Katrina ravaged the Gulf Coast, Airbus brought in supplies to Mobile as well as a portable hospital.
Talks continued between the city and EADS after last year’s awarding of the tanker contract to Boeing.
“It’s like giving birth to a baby — after seven years of labor,” said former Alabama Gov. Bob Riley.