Metals & Manufacturing Outlook
AEROSPACE OUTLOOK Boeing gets its seat at the top table as its CEO Dennis Muilenburg is named to Trump’s manufacturing council, and hence a direct line to the Oval Office. A question has been asked of this cozy relationship, namely ‘How close is too close?’ It seems that Muilenburg had listened in to a phone call in January between Trump and the Air Force General managing the purchases of Lockheed Martin Corp’s F-35 fighter jet. The high costs of the F-35 were the subject of Trump’s criticisms while he suggested that Boeing’s F/A-18 Super Hornet might be a cheaper alternative. Should Muilenburg have walked out? He was privy to information he would otherwise not have had. Meanwhile the Air Force cannot account for the $1 billion in savings Trump says he’s negotiated for the program to develop, purchase and operate two new Boeing jets to serve as Air Force One – after Trump’s boasts that he personally intervened to cut costs of both the F-35 and Boeing’s Air Force One. The figure for the F-35 alone is supposedly $700 million? To date tha Air Force has budgeted about $1.6 billion through 2019 for the Air Force One program. The 747 is the only U.S. - built passenger plane that can be adapted for purpose. Boeing is as usual in the aerospace news, and at the same time that it signs a deal with Singapore Air Lines for 39 widebodied 777 aircraft worth $13.8 billion, it announces, at least via
a ‘not-to-be-named person,’ that it is cutting back on its workforce in the Seattle area by 1,800 jobs in 2017 due to slowing sales for jetliners. There will be approved voluntary layoffs for 1,500 mechanics and a further 305 engineers and technical workers will leave voluntarily. Boeing has cut its workforce by 9.2 percent to 71,036 since the start of 2016. Airbus has supplied a good number of A350-900 aircraft to Singapore Airlines, which Airbus claims to be 25 percent more fuel efficient than the 777s. The Indian Air Force is looking to replace the third of its 650 planes that are over forty years old and to be retired in the coming decade. India’s air force has traditionally been Russia/former Soviet Union MIGs. Both Boeing and Lockheed Martin have promised to build plants in India if the world’s largest arms importer chooses their fighter jets and weapons. The U.S., Russia’s MIG Corp and Europe’s Airbus will doubtless be bidding. Prime Minister Modi has plans to boost his domestic defense industry by giving contracts to local companies, as well as asking foreign manufacturers to go in with local firms. In the event of U.S. participation, this would result in a lot of jobs being created overseas. Modi speaks of $250 billion in the coming years on fighter jets, submarines etc. to modernize his armed forces, but he wants ‘Make in India.’ Local conglomerates Tata Group, Mahindra & Mahindra and Tonbro Ltd have expanded more into defense and formed
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joint ventures with international manufacturers. SAAB is also in this picture. Boeing will open its first European plant in Post-brexit UK., a 25,000 sq. ft. facility that will employ 30 people, with recruitment starting in 2018. The $25 million plant in Sheffield in the north of England will supply parts for the 737 and 777 models, and will specialize in systems that extend and retract aircraft wing flaps. Boeing presently employs around 2,000 people in Britain, all in non-manufacturing roles spanning training, sales and services. Aerospace companies are exempt from cross-border duties under WTO rules. GE Aviation, (GEA) a none too insignificant part of GE, lets it be known where it makes its engines and how much it invests in the U.S. and elsewhere, and how many U.S. jobs this all means. The company is looking at five new plants, in Ellisville, Miss; Auburn, Ala; Asheville, N.C.; Lafayette, IN; and Huntsville, Ala, for a total investment of $214 million. Between 2011 and 2016 GEA invested $4.3 billion in the U.S. and $1 billion overseas. The company has 44,600 employees worldwide at 85 sites, 47 of them in the U.S. There are over 25,000 employees in the U.S. It has a backlog of over $150 billion. GEA and CFM International – a 50/50 joint venture of GE and |Safran Aircraft Engines, has a backlog of more than 15,000 jet engines. | March 2017