US disputes EU claim of WTO-Airbus compliance, threatens sanctions

As Yogi Berra once said, “it ain’t over till it’s over.”

The US Trade Representative rejected EU claims that it had complied with WTO rulings that Airbus received illegal subsidies and that these had been repaid.

Here is the USTR statement. USTR claims sanctions of $7bn-$10bn annually are in order.

The USTR also objected to new subsidies granted (though without specifying, this presumably relates to the A350, which was not part of the 2004 case). Airbus has claimed the WTO didn’t rule out subsidies per se, just the terms on which they had been granted and that new subsidies for the A350 would be drawn on commercial terms.

The financial statements of EADS, Airbus’ parent company, shows reimbursable launch aid (as EADS/Airbus calls it) increased by more than 1bn Euros in 2010 over 2009, but did not specify how much of this was associated with the A350. The A320neo program wasn’t launched until December 2010, so while this could have benefited from launch aid, the probability that the increase was mostly related to the A350 seems high.

Boeing issued a statement that names the A350.

Airbus rejected the USTR and Boeing claims.

We say: we’re tired of the whole thing. As we have noted many times, we don’t like subsidies, period. Of any kind. To Airbus or Boeing or anyone else.

38 Comments on “US disputes EU claim of WTO-Airbus compliance, threatens sanctions

  1. Well then, I guess EADS/Airbus wouldn’t mind if the US, Canada, and Japan all subsidized the Boeing’s B-737MAX, NSA, and future airplanes?

    • Well, if it is an RLI typ instrument? I don’t think so. But Boeing is adamant that they get gifts and not investment. Quarterly reports you know hurts the bottom line, ouch, ouch, ouch..

      • Uwe, what is the difference between “RLI” at “well below market rates” and a gift? It seems EADS/Airbus gets to enjoy both.

        OTOH, Boeing, being a company that is not owned, or partially owned by the government (like EADS is), must report its finances, good or bad, to the owners of the company, the share holders. Are those the quarterly reports you talk about?

      • KC – you know that not being (partially) owned by a government is as little deterrent to bad bookkeeping ad being (partially) owned is.
        I don’t think anyone can successfully argue the fact that Boeing is without clerical blemish, just as EADS is not.

        on the other hand – RLI as airbus used to enjoy is abhorrent. Any company trying to live off the teat of a government has no right to live. on the other other hand, some (or most) governments are keen to protect and promote their own interests. Attracting and Keeping large financial volume, high prestige business within their constituency is (and should be) one of the main goals of government – right below the well being and safety of their voters…

        whether airbus or boeing would complain should be immaterial. the US and EU should sit down and agree. to bad the US super committee and EU euro crises response don’t instill much confidence in the ability of politics to get to the best middle ground…

  2. I hope the US/EU don’t mess this up with bilateral sanctions. nobody is served by decreasing trade between the west.
    and a 1 billion loan doesn’t quite equate to a 7-10 billion sanction. I know money is tight in gov’t circles right now, but is it really a good Idea to try and leach it off your friends? How about banding together, get some successor to the bilateral agreement ended before the WTO case, get something more universal in place in cooperation with the WTO and get back to beating the BRIC gov’t competition using capitalist/commercial business practices!

    So US/EU – Shut up, sit down and get to work on being better instead of pointing out others flaws!

  3. KC135TopBoom :
    Well then, I guess EADS/Airbus wouldn’t mind if the US, Canada, and Japan all subsidized the Boeing’s B-737MAX, NSA, and future airplanes?

    Are you really ignorant to the subsidizing taking place?

    • I bet KC is a lot more aware than most on this board (not more than me of course, I am a long suffering narcissist like most)
      I do believe that was the most derogatory comment from him on the Boeing/US side of any issue for a long time.

      • I do like and trust Boeing products (the KC-135 saved my butt more than once because of its stout design and construction), but that does not mean I am blind to their screw-ups when proven and exposed.

        I am watching the KC-46A program very closely. I do like Boeing built tankers, a lot. But I just want to make sure my warfighter brothers and sisters, and the taxpayers get the best tanker system for the money they spend on it.

        The original KC-135As, each, costs $2M to $3M between 1955 and 1964.

        The KC-10A costs up to $95M each in the 1980s.

        In the 1980s the KC-135E reengining and systems costs up to $20M each. Also in the 1980s and into the 2000s the KC-135R/T program costs between $29M to $40M each.

        Today, the KC-46A is thought to costs and average of $150M each, through the entire 179 airplane program.

        We shall see.

    • Looks like Airbus acccumulated that money with some well reasoned premeditation.
      The liquidity is needed to prop up common suppliers that have been ruined or at least brought to the brink of bankruticy by Boeings mismanagement of the Dreamliner project.
      ( Should Airbus send a bill to Boeing for this ;-?

      • What????? where did you get that from? To me it looks like EADS is just sitting on that money since they use government money for development programs of the NEO and A-350. They are also using government development money on the A-400, which is less capable and more expensive than what those governments ordered back in `04, `05, and `06.

        You may recall Boeing bought many of the suppliers that were slowing down the development of the B-787 program.

        So, are you saying Boeing is now an Airbus supplier for programs such as the NEO and A-350? Airbus is financially propering up Boeing? So no, Airbus should not send the bill to Boeing, they should send them more money 😉

      • Airbus needed to accumulate the money to support A350 and A400M development which are entering their most expensive development phase right now. Since Airbus accumated all of that cash, their cash on hand has declined considerably. Current cash on hand is only listed as 9.84B US, probably due to declines in the value of the Euro and the significant outlay of cash for A400M and A350 development. In the case of Boeing, their cash on hand has risen considerably due to completion of 787-8 development and flight testing. Boeing’s cash on hand has climbed from $6 billion plus in 2009 to $9.18B in their latest financial reports.

        Boeing’s cash on hand should continue to improve as 787 deliveries increase. In terms of profitability Boeing is currently much more profitable than EADS and their Market Cap at 53.46B vs. 18.26B for EADS is nearly 3 times as much. In commercial captital markets Boeings greater profitability, much greater market capitaliztion, and lower future risk (they have only major drag on earnings, the 787 vs. 3 for EADS the A400M, A350 and A380, and unlike EADS the 787 is in service where the A350 and A400M are still in development and therefore carry a higher risk) would give them an advantage in raising commercial capital. So is it really any wonder why Boeing and the US governement would want EADS to really on the commercial capital markets exclusively for A350 and future product development.

  4. How much does the Boeing company pay per year in health care premiums for its workers, maybe 1/2 billion a year? How much does Airbus or Bombardier pay?

    • Slightly less than half the healthcare cost (used to be 50:50, the other nominal half is paid by the worker) Germany has universal healthcare, same with pensions.
      Your company going belly up will not have impact on your healthcare arrangement or your future pensions. IMHO this gives some sanity to worker relations.

  5. I’ll have to go look at the Boeing financial statements, but I am willing to say Boeing spends a lot more than $.5B ($500M) per year on employee health care premiums. I have no idea how much BBD or EADS spends as Canada and most of Europe have a government paid health care system.

    • It is not government paid.
      Healthcare and pensions ( and workplace savety, worker R&R ) arrangement is mandatory and organised under a legal framework. For similar results the US healthcare system is much more expensive ( you find divergent opinion : factor 2..3 ).

  6. KC135TopBoom :
    What?????

    Well, you may want to extend your reading portfolio beyond “Stars and Stripes” ? 😉

    Airbus has bought up and/or provided liquidity to a range of suppliers ( predominantly Tier 2 ones ) in dire straits.
    All these suppliers seem to have stumbled over being blocked by dreamliner nonprogress.
    i.e. sinking vast amounts of money in having production at the ready and nothing going forward. Remember the plan was to have hundreds of Dreamliners delivered to date.

    • The fact I am here confirms my reading portfolio is much more diverse than just the Stars and Stripes. I might add you might want to read more than just `der Spiegel (and blog your anti-US and anti-Boeing accusations), which is as left leaning as Time or Newsweek is on this side of the pond (wasn’t `der Spiegel accused of treason in the mid 1960s by the {then} West German Government, and seperately there was something about `der Speigel being involved with, or reporting on bribes in the early 1950s to set up the West German Capital in Bonn as opposed to Frankfurt).

      But it is a nice attempt to divert the discussion of Airbus continuing to suck of the government teat for money they obviously don’t need and bring it around to the B-787 program.

      The subject matter is about the USTR objection to new and increasing amounts of money being given to Airbus (dispite the dire financial position of the Euro Zone, and the possible collapse of the Euro) for the A-350 program. In fact, according to the USTR, ‘subsidies’ to EADS/Airbus increased by more than E1B between 2009 and 2010. How much did it increase between 2010 and 2011? What will it be for 2011 to 2012 when real money is needed for the A-350 and NEO developement?

      Ooops, I forgot, the NEO program is ‘only’ an E1B program and it is paid for by CFMI and P&W……

      BTW, we here in the US are very upset with the Fed sending some $600B to EU banks this week to help prop up the Euro. We don’t have the money to put into a sinking ship.

      • “Der Spiegel is” has quite the interesting background.

        Franz Josef Strauß tried to ransack the magazine after
        they exposed him taking bribes in connection with starfighter
        procurement from Lockheed ;-).
        Not unexpected that you equate investigative ( and successfull at that ) with leftleaning.
        In Germany that was a major test for “freedom of the press”
        being worth anything.

        Later Strauß was a driving force in the gestation of Airbus.

        Meantime der Spiegel has lost quite a bit of bite and driftet
        towards a neo liberal / US friendly position. ( They seem to hate and bash Airbus with a vegeance )

        So it is quite the colourfull subject though your observations while even more colourfull tend to lack standing in history.

        Money: The fed runs the presses as fast as they will go.
        So it is neither your nor my money. Only a fantastic scheme to prop the dollar. ( And some would like the EZB to do the same to increase inflation here, softening the Euro )

        Will be interesting to watch if our Euro-Poly-Ticks can stop haggling for a while and act in a concerted way after Merkosy presented the instruments of torture.

  7. “Money: The fed runs the presses as fast as they will go.
    So it is neither your nor my money.”

    As far as the current printed (and worthless) USD is concerned, you are right. But in the future, the US taxpayer will have to pay for it, and that is my money.

    “Will be interesting to watch if our Euro-Poly-Ticks can stop haggling for a while and act in a concerted way after Merkosy presented the instruments of torture.”

    The way I see it, Merkel is the EU’s only hope, Sarkosy is a joke just to keep the French in the EU driver’s seat. Germany has the only plan for the future of the EU and the Euro, while at the same time it should be ready to re-issue the Deutsche Mark (DM?) immediately.

    This is an interesting discusion, my friend Uwe, but we really need to get back on topic before Scott says something to each of us.

    • I have to hand to you KCTB. You have made some weird and no so well coordinated posts in the past, but you seem to have refined and made your actual comments more believable and factual. I thank you for that. Uwe, I can’t for the life of me understand how on earth you can just say that a government printing money as it pleases is not “yours or my money”.
      Every dollar made by the government without something to back it up is normally called “inorganic” money. It will devalue the currency it is made o,f be it dollars or euros. So, if I happen to have $100,000.00 dollars in my bank account and my government keeps printing inorganic money at will, my $100,000.00 won’t have the same buying power in the immediate and even less so in the foreseeable future because printing money at will creates inflation and devaluation of the currency. So yes, it is my money the government is messing with.

      • Hmopf.
        Humor, it is a difficult concept. ( Lets not talk about satire and irony )

  8. KC135TopBoom :
    I do like and trust Boeing products (the KC-135 saved my butt more than once because of its stout design and construction), but that does not mean I am blind to their screw-ups when proven and exposed.
    I am watching the KC-46A program very closely. I do like Boeing built tankers, a lot. But I just want to make sure my warfighter brothers and sisters, and the taxpayers get the best tanker system for the money they spend on it.
    The original KC-135As, each, costs $2M to $3M between 1955 and 1964.
    The KC-10A costs up to $95M each in the 1980s.
    In the 1980s the KC-135E reengining and systems costs up to $20M each. Also in the 1980s and into the 2000s the KC-135R/T program costs between $29M to $40M each.
    Today, the KC-46A is thought to costs and average of $150M each, through the entire 179 airplane program.
    We shall see.

    The typical walk around. But it is funny how you ignore all the published subsidies and bring up one US constantly deny.

    • Such as…..? Just when has the US Government subsidised Boeing? Are you talking about the NASA research? If you are you need to understand NASA also shares that research with Airbus.

  9. KC135TopBoom :
    Such as…..? Just when has the US Government subsidised Boeing?

    Have you forgotten tax breaks and all other things? Look at the slew of subsidies in SC.

    KC135TopBoom :
    If you are you need to understand NASA also shares that research with Airbus.

    LOL, sounds good doesn’t it. Completely ignores the dynamics behind it. Note similar things are happening in EU too.

    But it was you raising the question if the government is overpaying for work performed.

    • and the European Framework programs, CleanSky, not to mention all the Airbus nations that have R&D programs are??? LOL, you have done a selective reading of the WTO report.

      NASA’s aeronautics research budget has been in decline for more than a decade. Spain spends more on civil aeronautics research than the US does. NASA’s aeronautics budget has consistently been robbed to pay for silly space adventures that don’t promote the national economy much.

      It always amazes me that Europeans have such scorn for NASA, when their own programs are vastly larger, less transparent, and directed by and large, at one end user.

  10. Falcon, EADS gets tax breaks too. Many countries around the world give tax breaks to all kinds of industries to build and operate plants in their countries. Yes, the free NASA research to industry does sound good, and it is.

    Uwe, what facts did the USTR get wrong? Please provide proof.

    http://www.ustr.gov/about-us/press-office/press-releases/2011/december/united-states-challenges-eu-non-compliance-wto-ai

    “The WTO clearly found that every single grant of launch aid to Airbus, for every single aircraft that company produced, was a WTO-inconsistent subsidy that caused unfair adverse effects to U.S. industry and jobs,” said Ambassador (Ron) Kirk. “Our action today underscores what we have said all along – that the United States cannot accept anything less than an end to this subsidized financing. The United States remains prepared to engage in any meaningful efforts, through formal consultations and otherwise, that will lead to the goal of ending subsidized financing at the earliest possible date.”

    • I haven’t read much beyond the first major error:

      “The WTO clearly found that every single grant of launch aid to Airbus, for every single aircraft that company produced, was a WTO-inconsistent subsidy that caused unfair adverse effects to U.S. industry and jobs,” said Ambassador (Ron) Kirk. ”

      This happens to be a direct lie.
      The WTO judged on RLI given in the timeframe after the US walked away from an existing arrangement that saw Airbus RLI and Boeing tax gifts as balanced.
      Progressing from there any further utterances by Mr Kirk can’t have meaning in a fair exchange. .. Surprise. Just like “Japanese were hindered from buying US Cars” where in all truth the US auto manufacturers never produced anything desirable for those potential japanese customers.

    • Falcon, EADS gets tax breaks too. And they are subsidies too. It is not like Boeing does not get subsidies, as you tried to imply. And many other versions.

      If you think Airbus and Boeing are on equal footing as to benefiting from NASA paid research…

      • According to the WTO rulings (plural)… Yes. The R&D issue was pretty much equal on both sides. You need to read the reports, or re-read them.

  11. I guess negotaitions won’t start before the WTO verdict on the subsidies Boeing receives is out.

    Both sides get direct and even more indirect government support. Call iit subsidies or not, what’s in a name. Aerospace is full of it. If you don’t get it, you’re out of business. Everyone knows & denies.

  12. All: It has become necessary to update our Reader Comment policy as followed:

    “Updated, December 2011: Some Readers have apparently interpreted the “Personal Attacks” rule below as being limited to each other, and generally this has been the case. We are extending this qualification to personal attacks on the executives or other personnel of any company mentioned within these Comments. It is one thing to permissibly dispute the policies and public relations statements set by executives and personnel. It is quite another to attack the individual personally. This is not permitted.”

    Scott Hamilton

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