Airbus over Boeing is good for U.S.
Looking at cars with a friend this week, I discovered that Escape hybrids are unavailable for a test drive. Seemingly they are not sitting on a lot somewhere, waiting to be sold, as is the case with non-hybrid versions. American automakers’ sales philosophies are apparently changing. Historically they decided on particular models, made them in large numbers and then heavily advertised, discounted and incentivized them to entice us all to purchase the car that they (the automakers) believed we should have, not the car that we (the customers) necessarily needed or wanted. Along came Asian manufacturers, with a strategy based on current and future customer requirements (not the dealers current and future inventory), a market-driven approach.
The big American automakers are increasingly seeing a demand for cars that they are simply not set up to produce, but the rest of the world is. Power and size have always sold well in the macho U.S. market, but increasingly customers are seeking efficiency ” and good gas mileage. American companies are playing catch-up, developing hybrid variants and variants with smaller, higher-revving engines, cars that are almost the opposite of those their marketing campaigns have historically told us to buy. Meanwhile, Asian manufacturers are gaining market share and seem well set for the next few years, with tremendous advantages over their American competitors. To add insult to injury, their cars are made in state-of-the-art factories in the United States, where workers are less unionized, lower paid and cheaper in terms of benefits than their Ford and GM counterparts.
Now we hear news that an Airbus/Northrop-Grumman consortium has taken a leaf out of the Asian automaker playbook, winning the U.S. Air Force contract (potentially worth $100 billion) to build a fleet of new air-refueling tankers. This has certain members of Congress, not to mention Boeing, in a tizzy. Unfair, they cry! As with the American auto industry, Boeing and other U.S. defense industry players have for years been able to drive what the war-fighters should buy. Defense procurement is big business; the “Buy American” rules and the lobbying on behalf of the U.S. industry has enabled cozy deals between politicians, fat-cat lobbyists and industry insiders. Essentially there has been a culture whereby business and special interest has been dictating government policy.
The Airbus consortium has taken advantage of sluggish Boeing by copying the auto industry, setting up a sweet deal which is good for the U.S. military, good for the consortium, good for Mobile, Ala., and good for the U.S. taxpayer. The deal provides tankers that beat the Boeing alternative on all stated defense criteria (mission capability, proposal risk, cost and price, past performance, fuel capacity, takeoff performance and fuel consumption). The American alternative would give our war-fighters a second-rate solution. This Airbus deal will bring massive investment to Alabama not only for this contract but for future Airbus sales to the U.S. market. And that is the thing that is really making Boeing whine: This deal will put a major commercial airplane competitor in the heart of the United States, well-positioned for future civil and military contracts.
The Presidential candidates would do well to ignore Boeing, and the comments of certain politicians, union leaders and others fundamentally opposed to free trade. They should avoid populist vote stirring and instead point out that this could be the making of Boeing and other defense contractors and should be viewed as an opportunity for U.S.A. Inc., not a threat. It challenges U.S. companies to become less driven by special interests, more efficient and more customer-focused. It will enable the United States to take the high ground in any renegotiation of NAFTA or other free-trade agreements. They should welcome it not least because it makes our military stronger and more efficient. It is an opportunity to show leadership and a break with “business as usual.”