Economy

Boeing is Full of Crap

JM Ashby
Written by JM Ashby

There are times when I will defend Boeing to the extent that they employ a significant number of people who don't deserve to have their lives placed in jeopardy because of congressional or political dysfunction, but this is not one of those times.

The United States International Trade Commission (ITC) recently rejected a request from Boeing for an enormous 300 percent tariff on imports from Canadian airplane manufacturer Bombardier. Boeing claimed their position in the market was being threatened by imports that were allegedly being sold below cost because of subsidies from the Canadian government.

The ITC rejected that claim, stating that they found no evidence that Boeing was being harmed by the imports. I presume the ITC rejected the claim because they had access to Boeing's financials.

Boeing posted a massive profit today, beating all expectations. Of particular relevance is the significant increase in commercial plane sales which were allegedly threatened by Bombardier.

The world’s biggest planemaker said it aims to ship between 810 and 815 commercial aircraft in 2018, as much as 6.8 percent more than the industry-record 763 jets it delivered in 2017, putting it ahead of European rival Airbus (AIR.PA) for the sixth year in a row. Airbus delivered 718 jetliners last year. [...]

Helped by the hunger for new jets, Boeing forecast core profit would rise to $13.80 to $14.00 a share in 2018, ahead of analysts’ average estimate of $11.96, according to Thomson Reuters I/B/E/S.

For the fourth quarter ended Dec. 31, Boeing’s core earnings nearly doubled to $4.80 per share from $2.47 a year earlier, buoyed by rising plane output and a gain from changes to the U.S. tax law. [...]

Boeing’s commercial planes unit posted an 8 percent increase in revenue in the fourth quarter to $15.47 billion, while operating profit rose 50 percent to $1.78 billion.

The Trump White House blasted the ITC's decision to reject the tariff on Bombardier and that, as you may expect, was added to the list of misleading examples our of supposedly "broken" trade deals.

I took a moment to rant about it on Friday last week, but this story puts the lie to the idea that domestic production is being threatened or even eliminated by imports that are subsidized by foreign governments. The truth is we heavily subsidize our own industries through the tax code and that is particularly true of manufacturers like Boeing, or General Motors, or General Electric.

The American auto industry didn't nearly collapse in 2008 and 2009 because of cheap imports; it nearly collapsed because American carmakers were producing shitty cars.

General Electric is experiencing incredible turmoil right now, but it's not because of cheap imports; it's because the world is moving on from turbines that run on fossil fuels.

Boeing is still the leading planemaker in the world because they produce what the world is buying: fuel-efficient, technologically advance commercial planes. It doesn't matter what Bombardier is doing.

Trump's recent decision to impose tariffs on foreign solar panels is going to lead to job losses, not job creation, because domestic manufacturers don't have the capacity to meet demand for the installation and service industry that rose up around imported solar panels.

I have no faith that anyone in the White House understands any of this. They've already demonstrated that they don't.

  • muselet

    The world is pretty much full up with long-range planes, so the regional-airplane (100- to 150-seat) market is the new battleground for manufacturers.

    Tom Buerkle at Reuters:

    Chicago-based Boeing’s decision to file a trade complaint against Bombardier was unusual, as it doesn’t make a direct competitor to the 100-to-150 seat aircraft. Delta Air Lines, whose order for 75 Bombardier planes triggered last year’s grievance, said Boeing didn’t make a serious bid of its own but merely offered to sell it some secondhand Embraer jets.

    […]

    Commerce Secretary Wilbur Ross said $1.5 billion in Canadian government subsidies for Bombardier would damage U.S. industry. The 300 percent duties he tentatively approved would have effectively closed the American market to the company. That prompted it to sell a majority stake in its C Series program to Airbus. Boeing countered that the deal wasn’t sure to go through and that a promised C Series assembly plant in Alabama was “years away,” at best.

    By pursuing its odd trade complaint, Boeing pushed Bombardier into the welcoming arms of Airbus. To get directly competitive aircraft, it will now have to do a deal for Embraer E-jet planes, which will be tricky since the Brazilian government has ruled out foreign ownership of Embraer.

    Boeing has scored a spectacular own goal, yet the administration is *grrr* angry that the ITC didn’t let that trigger a frelling trade war with Canada. The gods alone know what the White House will do if the Embraer deal goes west.

    Three years and counting.

    –alopecia

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