A320 build rate, Alabama presents proposal to Airbus

Airbus won’t increase the production rate on the A320 family until introduction of the NEO and it’s now become public that Alabama has presented a proposal to Airbus for an assembly plant there.

Airbus disclosed the plan to freeze the build rate at the previously announced 42/mo during the Airbus Innovation Days we attended last week. Aviation Week has this detailed story.

We alluded to the prospect of a decision by Airbus by year end for an assembly site in Alabama in one of our reports of the Innovation Days. Yesterday, it became public that Alabama has presented a proposal to EADS, parent of Airbus.

Accordingly, here is our take: we think Airbus (EADS) will eventually make the decision to open an A320neo assembly site in Mobile. Here’s why:

  • Going beyond rate 42 probably means Hamburg, Toulouse and Tianjin are out of room;
  • Airbus wants to increase its US dollar-based footprint to reduce exposure to the volatility of the Euro;
  • A US site might help US sales but would make it easier to sell a “Made in America” campaign to the Defense Department for future contracts (expanding Mobile into DOD work); and
  • Opening Mobile in connection with neo would open nearer-term delivery slots to compete with the 737 MAX and help worldwide sales availability.

We think the odds are better than 50-50 but it’s tough to handicap this.

23 comments on “A320 build rate, Alabama presents proposal to Airbus

    • Not at all, keesje. We love it when Toyota, BMW, Honda etc, bring jobs to the US for commercial sales, We just don’t like taxpayer money going to foreign countries for the production of military equipment that is available here.

      • And your position,keesje, isn’t self centered????????

        “Meanwhile, a French lawmaker described as “indecent” a EUR400,000 golden handshake for Pierre-Henri Gourgeon, the former Air France-KLM chief executive who was fired last year, at a time when the airline’s personnel is threatened with job cuts. He called on Gourgeon to relinquish his claim to the departure bonus.
        Bernard Carayon, a deputy of the conservative UMP party, said Gourgeon was fired because he was pushing for Air France to buy aircraft made by Boeing Co (BA) instead of planes assembled in France by Boeing rival Airbus, a unit of European Aeronautic Defense & Space Co NV (EAD.FR).
        Carayon said he had been able to thwart that attempt by organizing a cross-party lobby of 186 French deputies.”
        -By David Pearson, Dow Jones Newswires; +331 4017 1740, david.pearson@dowjones.com

  1. Final assembly isn’t the problem. Enders said last year that their Final Assembly capacity was 50/mo. It’s the supply chain and back shops that are the problem, and a Mobile FAL isn’t going to do anything for them. If Airbus was serious about reducing cost, and moving to the dollar zone, opening a FAL is the worst way to do it. They would be better advised to source more in the US and Mexico if they were really interested in reducing costs and stabilizing the exchange rate thing. Of course, they could just wait a month until the Euro crashes and Greece exits and that should take care of the exchange rate problem. Your hypothesis of US airlines buying “american” jsut doesn’t hold water in light of Airbus successes in the USA. The simple fact is US airlines don’t give a hoot where their planes come from, it’s all about price. The US government isn’t going to be buying a large commercial based airplane for the near or medium term. If Airbus does this it will only cost them more money, as the planes will still be built in Europe (just like the Chinese FAL) and shipped to the new FAL (inventory holding, shipping, etc costs). Quality will be a problem until the line gets stable, which will actually be a dis-incentive for US airlines as they are all about quality, in service time, etc.

    In short, if Airbus does this it’s just a PR in your face to Boeing. Nothing more. Certainly not a sound financial move.

    To be honest, if EADS was really interested in more dollar content, they would be better off buying L3 or NOC. Especially if sequestration goes forward in any form. They’ll be a bargain.

  2. If Airbus builds a FAL in Alabama, it will begin with the A-320CEO, not the NEO (although the NEO may come later). Airbus was only interested in the Mobile site before as the FAL for the USAF tanker, and a few A-330Fs. A line in Mobile would be a minor production facility, much like Tianjin is, producing realitively small numbers of airplanes (I believe Tianjin only builds about 4 A-320s per month, 48 per year). Howard is right. Not only will this plan cost EADS lots of money for little return, they will have to face the German and French unions about shipping “their” jobs “overseas”. If Airbus were serious about a profitable FAL in Alabama, they would move the entire A-350 production line there.

    • You are seeing the wrong problems ;-)
      Biggest issue will be to qualify a workforce. China probably was easier: keen and willing to learn and no turn of the 19th century unions.

      With homebuild so to speak products any missled US WTO related sanctions will be more difficult to apply. ( Probably will hit those poor french fries and maybe cheese and wine again ;-).

      • Apparently you are unfamiliar with the LA (Lower Alabama) area and the Brookley Aerospace Center. ST Aerospace does aircraft modifications for FedEx, Brown and several other customers. Teledyne overhauls jet engines. The majority of work is on Airbus aircraft and DC10s. Eglin AFB is just down the road to the East and Pascagoula ship yards to the West with Austral located in Mobile along with Goodrich Aircraft Composites in Foley, AL. Of course this all adds up to a very competent work force with great knowledge of aluminum and composites, need I say more?

      • Quoting Jerry…

        And don’t forget Sony Corp… And of course… the fact the more military pilots get trained in “LA” then anywhere in the world! ;)

      • Also – Alabama is not known for unions which is why everybody puts there plants in the south, not Michigan or Washington.

  3. Do I detect an “Airbus, you are stupid tone” in your comments, gents?

    That was the attitude at Boeing ever since Airbus started in 1970 and to our perl,
    it wasn’t not until 1992, after many warnings from the undersigned, posted in
    Germany at that time and many others, when Boeing and MDD finally recognized
    that Airbus had become a serious challenge to our commercial aircraft industries.
    By than, it was already too late, when the US and the EU signed an agreement
    limiting all Govern’t subsidies to commercial aircraft building to 33% of the de-
    velopment costs of the aircraft and repayable at commercial lending rates, albeit
    with government guarantees, similar to what Lee Iacocca of Chrysler obtained
    from the US Govern’t in the 1980s.
    Our Supersonic aircraft development program in the early ’70s, was subsidized
    by 90% of the development costs, to prevent the European Comet aircraft from
    beating us in that category!

    And, have you fellows overlooked the fact that the US has been subsidizing our
    farm and tobacco industries for as long as I can remember, to keep foreign and
    much cheaper agricultural products out, as well as our oil industries, in spite of
    their multi-milloin dollar profits each year!
    The Chinese market for Airbus aircraft expanded substantially, after Airbus put
    the A320 assembly line near Beijing and will do so even more, especially with the
    A380, once these masses in China start traveling in ever larger numbers.

    • Rudy, you bring up some good points. However, I think your (farm) agricultural products argument is a bit weak… The EU is also a very large farm subsidizing entity.

      The US Imports far more produce then it exports. Just visit a local market/store for the evidence.

      In certain crops like wheat. The US is a net Exporter simply because we produce more then we consume (like Canada). The largest wheat producers like China and India mostly consume what they produce internally. And on a world note… That means the US provides the most free wheat to countries that are in need (famine, flood etc.) then any other country in the world. In that case you could say we are subsidizing the world!

      • “And on a world note… That means the US provides the most free wheat to countries that are in need (famine, flood etc.) then any other country in the world. In that case you could say we are subsidizing the world!”

        “Free wheat” gifts actually marginalise the local farmers to extinction in those countries. ( a misdeed not limited to the US though. Most foreign aid is longtime destructive for the recipients )

  4. Our Supersonic aircraft development program in the early ’70s, was subsidized
    by 90% of the development costs, to prevent the European Comet aircraft from
    beating us in that category!

    The Chinese market for Airbus aircraft expanded substantially, after Airbus put
    the A320 assembly line near Beijing and will do so even more, especially with the
    A380, once these masses in China start traveling in ever larger numbers.

    Rudy, sorry but I don’t quite follow your comment concerning the Comet aircraft, would you be so kind as to explain.

    As you rightly state the Tianjin, facility has had far reaching benefits in terms of softening up the whole region for EADS Whilst the fifty odd airframes per annum ain’t that great it exceeds a months production elsewhere, it’s also a very flexible cost effective site.

    • Obviously Rudy had the Concorde in mind. It’s only a typo for sure. Proof of that is that he made the same comment some time ago and mentioned the Concorde. As to the Airbus Chinese factory, it only illustrates the forward thinking of Airbus. Bombardier also understood that equation and created an alliance with COMAC.

      But unfortunately Boeing now lives in the past and is slowly but gradually heading to become the next McDonnell-Douglas. There was a time when Boeing employees were encouraged to read a book about Boeing’s history called “Vision”. I think it’s time for the Boeing Management to start reading that book again.

      • .. a book about Boeing’s history called “Vision”.

        .. you couldn’t resist, could you ;-)

        China:
        The keyword of prominence here is “cooperation” assuming mutual benefit.

        This is not the way American Business thinks and operates.

  5. Normand Hamel :
    Obviously Rudy had the Concorde in mind. It’s only a typo for sure. Proof of that is that he made the same comment some time ago and mentioned the Concorde. As to the Airbus
    Chinese factory, it only illustrates the forward thinking of Airbus. Bombardier also understood that equation and created an alliance with COMAC.
    But unfortunately Boeing now lives in the past and is slowly but gradually heading to become the next McDonnell-Douglas. There was a time when Boeing employees were encouraged to read a book about Boeing’s history called “Vision”. I think it’s time for the Boeing Management to start reading that book again.

    Uhmm, aren’t the Chinese building not one but two competing airplane models in the 140 to 200 passenger planes? I think that once they get whatever tech they need from the A320 (and use it for theirs), the A320 would not sell as much as we might think if the Chinese programs can deliver somewhat respectable numbers for their programs. I doubt that they can be beaten on price. So, I would not count Boeing with living in the past just because they did not open an assembly line there. If that was the case, perhaps Airbus or any other aircraft manufacturer is living in the past because they had not opened a FAL in India, which could just be as large as China in a few more years by the rate they’re going.

    • Lets look into history and paraphrase:
      Knowledge transfer to the US during WWII helped win the war for the UK but cost dearly later.
      In a way this is a repetitive pattern.

      • Not only did the Allies transfer new technologies among themselves, so did the Axis powers (Like jet engines and airplanes transferred from Germany to Japan). You lost that war. England could not win WWII on her own. Churchill needed the US more than the US needed England, and Churchill knew that.

  6. Phil, as Norman already indicated, I should have mentioned the Concord and
    NOT the Comet, when I talked about the US subsidizing the SST developm’t.

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