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Wednesday, March 25, 2020

ANALYSIS/OPINION:

If we’ve learned one thing from the coronavirus outbreak, it is that America needs to make the things America needs in America. 

We can’t depend on China for our pharmaceuticals. We can’t depend on the Middle East for our fuel. And we can’t depend on a European Union conglomerate or the Chinese for aircraft manufacturing.


But reliance on Airbus and China’s government-owned Commercial Aircraft Corporation could move a big step closer to reality if the government can’t afford the airline manufacturing industry the same assistance it has offered to the airline industry, the hospitality industry and others damaged significantly by the coronavirus outbreak. 

Boeing has asked the Trump administration to consider at least $60 billion in loan guarantees for the aerospace manufacturing industry. Airports separately have asked for $10 billion in federal loan guarantees.

Boeing did not state how much of the loan guarantee was needed for Boeing itself and how much for its suppliers. But it did say that typically 70 percent of its money goes to paying its 17,000 suppliers, which would mean at least $42 billion would end up in the hands of its suppliers, which range from prominent engine manufacturers such as GE and Honeywell to mom-and-pop suppliers of other goods and services.

It’s not clear if banks are willing to make the loans without government backing, and without them, Boeing and much of the U.S. aerospace industry would be facing a collapse that would put hundreds of thousands of workers out of jobs that probably won’t readily return when the coronavirus threat eases, a Boeing spokesman said.

To be sure, Boeing’s problems predate the coronavirus outbreak. Thanks to difficulties with its 737 and an end to what has been a boom in aircraft purchasing, the company had a negative year in 2019 — more orders were canceled than placed — and it booked zero new orders for the month of January.

It has picked up some of the slack by taking over, along with Airbus, aircraft production for Embraer and Bombardier. But the firm says it is running out of liquidity and could be within weeks of closing without the loan guarantees.

Its competitors will do whatever it takes to get ahead. Airbus went from 30 percent of the market before 9/11 to 50 percent of the market in large part because of subsidies that later were found to have violated World Trade Organization rules. The United States won the largest judgment the WTO has ever awarded — $7.4 billion — for the Airbus violations.

Things are even more urgent at the Commercial Aircraft Corporation in Beijing. China’s government-owned aerospace firm is third behind Boeing and Airbus in its own country when it comes to manufacturing airplanes. The Chinese government has made it a priority to fix this as part of its “Made in China 2025,” which is attempting to perform all vital manufacturing of goods for China in China

Development of its single-aisle aircraft is five years behind schedule and continues to be plagued by technical difficulties. New versions are rushed into testing so quickly they don’t even take time to paint the aircraft before putting it in the air. Still, it has recorded less than a fifth of the successful flying time required for certification by China’s Civil Aviation Administration.

The Chinese may not be willing to wait to figure it out either. In 2018, U.S. prosecutors charged members of its diplomatic corps, plus hackers and company insiders with hacking into the computer systems of U.S. aerospace manufacturers to steal design information.

President Trump has said the government will help, but he needs the backing of Congress. Conservatives in Washington are being asked to support all manner of things they never would in normal times — $1,000 checks to every American, quarantine and shutdown orders from government, massive aid to all manner of American industries. 

Boeing and aerospace manufacturing were struggling before the virus, but the virus forecloses any chance at a quick recovery. And without a quick recovery, we could lose this key capability at a time when we need to build up American-made capabilities and keep Americans on the job. 

Congress should make this happen. It’s less expensive to do it than to endanger the aerospace industry at this particular point in our nation’s history. 

• Brian McNicoll, a freelance writer based in Alexandria, Virginia, is a former senior writer for The Heritage Foundation and former director of communications for the House Committee on Oversight and Government Reform.


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