Tuesday, January 06, 2015

Boeing could suffer collateral damage from legislators' fight over Export-Import Bank

A new Congress soon will take up an old debate - whether to reauthorize the Export-Import Bank for another five years - and the outcome will affect Boeing Co.'s ability to continue its fast-paced growth in sales of Dreamliners and other commercial planes to emerging markets.

Boeing, which makes its 787 Dreamliner jets in North Charleston and Everett, Wash., is the 80-year-old bank's top customer, accounting for one-third of all the bank's lending activity from 2007-13, according to Standard & Poor's. In 2013, the bank financed the purchase of $37 billion in exports, with $8 billion of them for Boeing products.

The bank provides loan guarantees, loans and insurance to help foreign companies buy U.S. goods when commercial lending isn't available.

Airplanes are so expensive that many emerging economies in Asia can't afford them without the bank's help. With more than 75 percent of Boeing's future production headed to places like China, India and Indonesia, a lot is at stake for Boeing as Congress debates reauthorizing the Ex-Im Bank before its June 30 expiration.

There's a good chance the bank will go under this year.

It barely survived a Tea Party effort to kill the program last year. Instead of giving the bank its usual five-year reauthorization, Congress in September approved a resolution that kept the bank on life support through the first half of 2015, leaving a final decision to a new Congress with Republican majorities in both chambers.

Tea Party resistance to the bank continues to grow, with many Republicans seeing the bank's existence as a form of corporate welfare and its demise as a win for small government.

The bank's supporters - including Jim Newsome, president and chief executive officer of the S.C. State Ports Authority - say they don't know what all the fuss is about. The bank doesn't cost taxpayers any money; it actually produces a profit - more than $3.4 billion since 2005, according to Bloomberg News - that is returned to the U.S. Treasury.

"It works," Newsome said of the bank. "It's an effective form of financing that earns money. I don't understand why you would change it. If it's for ideological reasons, that's just not good enough."

The Ex-Im Bank has helped more than 50 South Carolina companies export more than $1.2 billion in products and services around the world over the past five years.

Newsome said the loss of the Ex-Im Bank means foreign companies might begin to spurn U.S. products, instead turning to other countries where similar export credit agencies exist. Instead of buying Boeing planes, for instance, foreign companies might choose to purchase French-made Airbus planes financed through that country's version of the Ex-Im Bank.

Or, in the Port of Charleston's case, the product might be gas turbines.

"We export a lot of gas turbines produced by Siemens and General Electric," Newsome said. "These are shipped to developing countries where financing is rather critical. To the extent that they were precluded from doing that business because the financing wasn't there, that order might be lost to a French firm or a Korean firm, and that would hurt us."

Ray Conner, president and chief executive officer of Boeing Commercial Airplanes, said in an essay for The Post and Courier last year that the Ex-Im Bank is "critically important" to his company.

"Major airplane contracts can run into the billions of dollars and for a variety of reasons - geopolitical instability, tight credit markets - commercial financing may not be available for even credit-worthy airlines," Conner said.

He said legislators looking to kill the bank must understand "the damage this would do the state's growing but still nascent aerospace sector and to Boeing's ability to keep manufacturing airplanes for export at the (North) Charleston plant."

South Carolina's congressional delegation has been split over the bank's future. Republican senators Lindsey Graham and Tim Scott have supported the bank, while Rep. Mark Sanford voted against the resolution that extended the bank's life to this year.

Story and Comments:  http://www.postandcourier.com

No comments:

Post a Comment