Europe's Airbus to build planes in US
July 03, 2012 12:00:00 AM
European planemaker Airbus unveiled plans to open a factory on Boeing's home turf Monday, a gambit that would see the firm roll out its first US-built plane by 2016.
The new $600 million assembly plant, to be built in the southern port city of Mobile, Alabama, on the Gulf of Mexico, will produce the popular A320 family passenger planes.
Airbus estimates 4,600 new single-aisle aircraft will be needed in the United States over the next 20 years and the new US plant could more than double its share in the huge market.
"The time is right for Airbus to expand in America," said Fabrice Bregier, Airbus president and chief executive.
John Leahy, the company's chief operating officer for customers, said that Airbus currently holds about 20 percent of the narrow-body US market.
"By becoming a US citizen we can increase that market share to perhaps the... 50 percent that we've been able to enjoy in other parts of the world. I think it can be done in the next few years," Leahy said at a news conference.
Leahy said the decision helps to level the playing field with Boeing, particularly in customers' perceptions.
"Now becoming a US manufacturer -- and that's the way it's going to be perceived," he said.
The Alabama plant "can only help us just the way BMW, Mercedes, Toyota moving into manufacturing in the US helped them sell more cars in the US," he said.
The move extends the Toulouse, France-based company's global production network, which includes assembly lines in Hamburg, Germany, and Tianjin, China.
Chicago-based Boeing, by contrast, only builds aircraft in the United States, in Washington state and South Carolina.
Airbus, a subsidiary of the European Aeronautic Defence and Space Company, said construction of the plant at Mobile's Brookley Aeroplex facility would begin in the summer of 2013.
Airbus has operated an engineering center at the site since 2007, providing support for the A380, A330 and A350 XWB planes.
A320 assembly is planned to start in 2015, with first deliveries set for 2016.
The plant is expected to produce between 40 and 50 aircraft per year by 2018, the company said, and should create up to 1,000 "high-skilled jobs" in the United States.
The announcement caps a seven-year courtship between Alabama officials and EADS over locating a major industrial facility in the state.
In 2005, EADS had proposed building a $600 million assembly line for its larger A330 aircraft as part of a bid for a $35 billion US Air Force contract for aerial fueling tankers.
But that deal was ultimately awarded to Boeing last year, amid a seven-year-old trade dispute between the United States and the European Union over alleged illegal subsidies to the two rivals.
In parallel cases wending their way through the World Trade Organization's dispute process, the Geneva-based body has found that both Airbus and Boeing had received WTO-inconsistent subsidies.
Airbus gained an early advantage over Boeing in the single-aisle market by announcing in December 2010 it was putting new engines in its best-selling A320 that would consume 15 percent less fuel than previous models.
The first of the new A320 Neo aircraft should be rolling off the European assembly line in 2015, two years before Boeing's rival aircraft, the 737 MAX.
Both Airbus and Boeing have big order books. With current production facilities, they need years to satisfy demand.
The director of strategy at EADS, Marwan Lahoud, in explaining the US move, said: "In any case, we have to increase the rate of production."
By locating some production in the United States, Airbus will avoid some foreign-exchange risk by switching some costs into dollars -- the currency used for most international aircraft sales.
At the same time, Airbus says there will be no loss of jobs in Europe -- that assembly only accounts for about five percent of the finished value of the plane.
Even so, Airbus could also benefit from lower labor costs because Alabama law makes it more difficult to form unions.
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