Airbus to build A320 plant in Alabama

   Alabama scored a major economic coup when Europe’s Airbus announced Monday that it plans to erect a $600 million plant outside Mobile and hire 1,000 workers to build narrow-body planes from the A320 family. 
   The Toulouse, France aerospace company said it entered the home turf of its rival, Boeing, to get closer to its customers. The United States is the largest single-aisle aircraft market in the world, with an estimated need for 4,600 aircraft during the next 20 years. 
   The aircraft maker said construction will begin next summer and it expects to produce 40 to 50 aircraft per year in Mobile by 2018, with first deliveries beginning in 2016.
   The news comes more than a year after European Aeronautic Defence and Space, the parent of Airbus, lost a bitter bidding war with Boeing to replace the U.S. Air Force’s aging fleet of aerial refueling tankers. EADS promised to build a plant in Mobile and use U.S. suppliers in an effort to show that its selection would lead to the hiring of tens of thousands of U.S. workers. To sweeten the deal, Airbus said in 2008 that it would build civilian A330 freighter aircraft in Mobile if the Air Force selected it to build the tankers.
   An Airbus news release did not mention the Port of Mobile as one of the reasons for selecting the city for the new manufacturing facility, but during the tanker negotiations the company touted the port as a major asset for bringing in parts and large sub-assemblies from Europe for its assembly line.
   Airbus also does final assembly at plants in Toulouse; Hamburg, Germany; and Tianjin, China.
   The manufacturer already operates an engineering center in Mobile that employs more than 200 people. 
   In a globalized aerospace industry with airlines that operate nationally and internationally, the need to build planes in the United States to gain sales from U.S. carriers is not as crucial as labor costs and currency exchange rates in Airbus’ decision, according to analysts.
   Richard Aboulafia, a vice president with the Teal Group, told National Public Radio’s “All Things Considered” that U.S. airlines don’t buy planes based on where they are built. Airbus’ move is more motivated by a desire to place roots in the United States in hopes of winning more defense contracts and to take advantage of lower-cost labor in the Southeast, he said.
   Last year, Boeing also opened a plant in right-to-work South Carolina to build 787 Dreamliners.
   Airline analyst Scott Hamilton, managing director of consulting group Leeham Co., said in a June 30 blog posting Airbus can substantially lower its costs by producing dollar-denominated planes. “Airbus costs are in euros; airplanes are purchased in dollars. Every 10 cents the dollar weakens to the euro costs Airbus $1 billion in profits. Although final assembly is only 5 percent of the airplane’s value, it represents 15 percent of its costs, according to a Wall Street analyst,” he wrote.
   Hamilton said that opening another plant gives Airbus an opportunity to attract potential customers looking for new fuel-efficient planes that otherwise would have to wait until at least 2020 to get orders filled because Boeing and Airbus have a huge backlog of existing orders for new model 737s and A320s. Airbus now will be able to offer four, and eventually eight, production slots per month to new customers.
   Boeing reacted by saying any jobs created by Airbus are outnumbered by U.S. jobs lost to unfair competition because of European government subsidies. Boeing and Airbus have accused each other for years of trade violations. Airbus says Boeing commercial aircraft are indirectly subsidized by U.S. government defense and space contracts.
   Airbus is part of a growing trend of U.S. and foreign manufacturers that are investing in the United States, because of the low value of the dollar, skilled labor and other factors.
   Last month, Toyota Motor Corp. announced that it will expand its production facility in Huntsville, Ala. 
   Read more about why the United States is becoming attractive again to some manufacturers in American Shipper‘s June issue cover story, “Right Shoring.” – Eric Kulisch