Airbus to open factory on rival Boeing's U.S. turf

MOBILE, Alabama (Reuters) - Flanked by local Gulf Coast politicians, top executives from European planemaker Airbus unveiled their plans to build their first U.S. factory -- a move they said that would help them take market share from rival Boeing Co.

The unit of EADS believes that opening a plant in Mobile, Alabama, which will assemble its narrow-body A320 aircraft, will help it take "more than a few percentage points" of market share from its prime rival in the world's busiest aviation market, according to Airbus sales chief John Leahy.

Due to open in 2016 and expected to create some 1,000 jobs, the company said it will be only the second Airbus plant outside Europe that builds its top-selling workhorse jet; the other one is in China.

Airbus currently has a 20 percent market share in the narrow body jet segment in the United States, compared with 53 percent of the market worldwide.

Even though assembly is a relatively small part of the work of building an aircraft, Airbus is betting having an assembly line will boost its credentials and help it win deals.

"I think we became American with this," said New York-born Leahy. "Even if we have been spending $12 billion a year in the U.S. and have 40 percent of our procurement in the U.S., that doesn't quite make you American in the way an assembly line does."

Airbus' announcement drew a lineup of heavy-hitters from U.S. airlines and suppliers, including American Airlines CEO Tom Horton, JetBlue Airways Corp CEO Dave Barger and Goodrich Corp CEO Marshall Larsen.

They arrived to the strains of the rock group Steve Miller Band's 1977 hit "Jet Airliner" -- that homage to Boeing's 707 is something of an anthem for the aviation industry, and Boeing last year hired Miller himself to perform it for workers at its Everett, Washington, factory.

Airbus and Boeing are locked in a tussle at the World Trade Organization, with each accusing the other of receiving illegal subsidies.

"While it is interesting once again to see Airbus promising to move jobs from Europe to the United States, no matter how many are created, the numbers pale in comparison to the thousands of U.S. jobs destroyed by illegal subsidies," Boeing spokesman Thomas Brabant said in an e-mailed statement.

SHOT IN THE ARM FOR GULF COAST

Analysts said the move could reshape the U.S. aerospace industry and boost manufacturing on the U.S. Gulf Coast.

"The town is right, the talent is right and the time is right," Airbus Chief Executive Fabrice Bregier told a crowd that included U.S. Senator Richard Shelby of Alabama and the state's governor, Robert Bentley.

Local economic development officials said the new plant could help generate new jobs, as big manufacturing operations tend to lure suppliers and additional jobs. State officials had been lobbying Airbus for years.

"It's like giving birth to a baby -- after seven years of labor," former Alabama Governor Bob Riley said.

The region in the southeastern United States is still recovering from the devastation of 2005's Hurricane Katrina.

"Something like this just gives us new marketing opportunities, new opportunities to talk to a lot of different aerospace companies," said Neal Wade, chairman of the Aerospace Alliance, an association of government and business leaders from the states of Louisiana, Mississippi, Alabama and Florida. "You immediately put yourself into a different category."

Airbus suppliers welcomed its move.

"It makes all the sense in the world for Airbus to be here," said David Hess, president of United Technologies Corp's Pratt & Whitney unit. "We're glad they are here."

Manufacturing has been a relative bright spot for a U.S. economy still struggling to recover from a 2007-2009 recession. However, data on Monday showed manufacturing activity unexpectedly contracted in June, the first dip in three years.

JOINING THE ONSHORERS

In building a U.S. factory, Airbus will follow a broader trend in the manufacturing sector -- producing goods closer to where they are used. While the Mobile operation is an overseas excursion for the European company, it comes as many U.S. companies are bringing manufacturing back home after finding the low wages they had found overseas came with bigger-than-expected costs for logistics, quality control and other expenses.

"As globalization matures, companies have a better understanding of the total costs of full life cycle production and the U.S. offers a number of advantages," said Jack McDougle, senior vice president at the U.S. Council on Competitiveness and a former Commerce Department official.

He cited the emergence of abundant natural gas, intellectual property protection, quality control, shorter lead times and high productivity.

Companies such as General Electric Co and Fortune Brands Home & Security Inc have already returned manufacturing to the United States.

Boeing has also embraced the trend after suffering through years of delays in the launch of its 787 Dreamliner aircraft after handing off much of the manufacturing responsibility for the aircraft to outside suppliers.

"We, lemming-like, over the last 15 years extended our supply chains a little too far globally in the name of low cost," Boeing CEO Jim McNerney said at a Washington summit on manufacturing held in February. "We lost control in some cases over quality and service when we did that."

(Additional reporting by Tim Hepher in Paris and Jed Horowitz in New York; writing by Scott Malone in Boston; editing by Maureen Bavdek, Jeffrey Benkoe and Leslie Gevirtz)

Source: http://news.yahoo.com/airbus-open-factory-rival-boeings-u-turf-152737698--finance.html

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