The company has started acquiring the parts needed to assemble the aircraft, including ordering Canadian-made turboprop engines that cost $350,000 to $700,000 apiece and take six months to deliver.
The deal requires insurance from the Export-Import Bank, the agency that makes or backs loans to foreign companies that buy U.S. products.
Many conservative Republicans have pushed to shut down the bank, calling its assistance corporate welfare. The White House and supporters in Congress wanted a five-year extension but settled in September for a last-minute, nine-month reauthorization of the bank.
The short-term extension, however, did little to resolve the uncertainty surrounding the bank.
And that's stirring up trouble for firms such as Air Tractor, which can't be sure if the agency's loans and other aid will be available after June 30.
"We've been waiting on a down payment for this contract for some time, and it's being delayed because of his concerns that the financing might not go through," Tyler Schroeder, Air Tractor's financial analyst, said of the unnamed buyer.
"If we are unable to perform on that contract, we then have to take those aircraft out of the production schedule," he said. "But we've already got the material, so we're stuck with that inventory. And it's large enough that we might have to cut back on employees."
Air Tractor, which had about $75 million in revenue last year, employs 260 people at its Olney, Texas, facility, Schroeder said. Exports account for about 50% of the company's revenue, and Ex-Im insures about half of those transactions, he said.
"When we realized we weren't getting a five-year deal, nervousness started to set in," Schroeder said about the reauthorization.
He wasn't alone.
"We are hearing from our smallest members to our largest members that the continued uncertainty over the long-term fate of the Ex-Im Bank is causing a lot of concern," said Linda Dempsey, vice president of international economic affairs at the National Assn. of Manufacturers.
As the Sept. 30 reauthorization deadline approached, foreign competitors of U.S. exporters used the uncertainty over the bank's financing to try to lure away sales, she said. That's likely to happen again as June 30 approaches.
U.S. companies compete against firms in China, Brazil and many European nations that also offer assistance to their exporters.
"There are 60 other export credit agencies around the world and they would like nothing more than to have us out of the picture," Ex-Im President Fred Hochberg said. "Every time I travel overseas, I have to speak to potential customers of U.S. goods and services and have to assure them we're here."
But with strong Republican opposition to the bank, it's unclear how long it will continue to operate.
In January, Republicans will take control of the Senate to go with their House majority.
Heavy business lobbying, led by major bank financing recipient Boeing Co., persuaded House Speaker John A. Boehner (R-Ohio) to include a short-term reauthorization of the bank in a government funding bill in September.
But House Majority Leader Kevin McCarthy (R-Bakersfield) favors closing the agency. And the bank's leading opponent, House Financial Services Committee Chairman Jeb Hensarling (R-Texas), hasn't let up on his criticism.
Hensarling blasted the bank in November after Reuters reported that it mischaracterized potentially hundreds of large companies and subsidiaries of major firms as small businesses.
"He believes Congress should allow Ex-Im to expire on schedule because it's fundamentally unfair to small businesses and taxpayers," said Jeff Emerson, Hensarling's spokesman.
Although the bank pays for its operations solely through interest and fees on its aid, critics note that taxpayers are on the hook for any losses on the bank's $140 billion in outstanding assistance.
But the bank, founded in 1934, has not had to seek a taxpayer bailout since the 1980s. In the fiscal year that ended Sept. 30, the agency provided $20.5 billion in export assistance and sent $675 million in profits to the Treasury. That followed a record $1.1 billion in profits last year on $27.7 billion in aid.
As the effects of the 2008 financial crisis have ebbed, the agency's assistance has decreased as stronger private banks have been able to provide more financing.
Still, Ex-Im supporters said, its aid is essential to many transactions, such as those in emerging markets that private banks will not back.
"I'm dead in the water if the insurance program goes out of business," said Payne Hughes, president of Thrush Aircraft in Albany, Ga. "There is no private insurance out there today."
His company, which has about $50 million annual revenue and 200 employees, makes planes for farmers to spray their fields. The aircraft cost $900,000 to $1 million each and there isn't enough profit in the deals for private insurers, Hughes said.
Exports make up about 80% of Thrush's sales. Buyers in South America and elsewhere in the Southern Hemisphere don't submit orders until June and July each year, after they harvest their crops in late spring, Hughes said.
With Ex-Im's status up in the air after June 30, he's pushing customers to try to commit earlier. If Congress doesn't reauthorize the agency, it would be prevented from making new deals but would stand behind ones already approved.
"I'm trying to get as many sales as I can before June in case it does go kerplunk," Hughes said.
One of his main competitors is a Brazilian company that has export assistance from that country to help sales, Hughes said.
Westinghouse Electric Co., which builds nuclear power plants, has the same concerns as it competes against state-owned firms or foreign companies with more stable export assistance, said Mark Murano, president of Westinghouse's Americas division.
"You need to minimize any doubt of anything to get these projects to move forward," he said. "The short-term reauthorization may have solved some of the political wrangling that's going on but it doesn't give us the long-term authorization we want."
Bank supporters are pushing for a long-term reauthorization. The manufacturers group has been meeting with newly elected members of Congress to press their case, Dempsey said.
Schroeder has contacted lawmakers as well. If the bank shuts down, it will not only hurt Air Tractor but the small Texas community two hours northwest of Dallas where it's located.
"The mere uncertainty that this is creating is something that a lot of business do not know how to handle," he said. "This is a tough industry … and to have your own government basically making it twice as difficult as it should be is very disheartening."
- Original article can be found at: http://www.latimes.com
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