With lots of fanfare and business media coverage, Airbus has announced plans to invest $600 million in its first production facility to be located in the U.S.. This facility is destined to be located in Mobile Alabama, where the state of Alabama offered Airbus a package of what is reported to be $100 million in incentives. Wasting little time, The Marketplace section of the printed edition of The Wall Street Journal today features a near half-page advertisement from Airbus reminding readers of the $14 billion already invested in the U.S. based supply chain while announcing this new world-class production facility promising thousands of new jobs and an expansion of partnerships with hundreds of U.S. based suppliers.
Airbus has plans to build its current A320 aircraft in the U.S. plant in 2015, and ramp the facility to produce upwards of 50 aircraft annually by 2018, including the new A320 Neo version which has amassed a tremendous sales response from airline customers. The new facility is bound to establish a broader aviation supply chain foothold in the U.S., as well as brand versions of the A320 as “Made in the U.S. A.”.
Boeing, was not pleased with this announcement that an arch-rival was establishing manufacturing presence on its home turf. The reasons are many. Airbus CEO Fabrice Bregier indicated in a joint news conference with the Governor of Alabama that the new plant will help in increase Airbus market share for large jets in the U.S. market. Alabama provides special attraction to foreign-based manufacturers because it has been deemed a “right to work” state fostering a non-union workforce, and this new facility will be the first Airbus non-union facility. Both Boeing and Airbus have been engaged in a dogfight for dominance of new single-aisle aircraft sales, pitting the popular A320 Neo against the newly announced 737 Max. The new presence of an Airbus manufacturing facility in a U.S. based, non-union facility is a shrewd move to counter Boeing in this market, and potentially gain additional pricing power.
An article printed in The Wall Street Journal (paid subscription or metered view required) indicates that Airbus encouraged its U.S. based suppliers to speak out in favor of this move, and one of the supporters was General Electric CEO Jeff Immelt, who serves as chairperson of the President’s Council on Jobs and Competiveness. The WSJ also reports that up to 40 percent of the value-chain of Airbus planes already comes from U.S. based suppliers, and according to Airbus officials, the decision to open this plant is partly a consequence of previous World Trade Organization (WTO) cases, lobbied by Boeing, accusing European governments of providing Airbus with illegal subsidies. Boeing previously opened a second final assembly facility in North Charlestown South Carolina, which is also a non-union facility and recently celebrated its first customer shipment.
This announcement is obviously good news for the U.S. aviation supplier and logistical services base and for adding to the current resurgence of U.S. based manufacturing. The move also adds to the building importance of the port of Savannah and Huntsville International Airport as more important logistical hubs serving a very vibrant manufacturing region in the southern U.S..