Boeing CEO: Losing Export-Import Bank "means loss of jobs"
It may sound like another staged political battle over something you've never heard of. But for Boeing (BA), the fight in Congress over the future of the U.S. Export-Import Bank represents perhaps the biggest threat to the company in its 100-year history.
And if Boeing loses that fight, CEO Dennis Muilenburg says thousands of Americans who now work for the aerospace giant will be forced out of their jobs -- as will thousands of other American workers in Boeing's supply chain.
That's because Boeing will lose a lot of business to European rival Airbus without Ex-Im. The bank now guarantees about 15 percent of Boeing's commercial aircraft sales -- basically it backs loans to customers outside the U.S. Without the bank, Boeing's customers will be forced elsewhere -- mainly to Airbus.
"That means loss of jobs, it means loss of competitiveness. And in the long run, it's just not a path that the country should be on," Muilenburg said.
In his first TV interview since taking over Boeing's reins, Muilenburg said he's optimistic Congress will find a path that leads to a vote for reauthorizing the bank. But he said if Congress fails to do so, it will cause "significant damage" to Boeing and thousands of smaller companies in its supply chain.
Boeing is America's largest manufacturing exporter, with more than 150,000 employees nationwide. Overall, counting the thousands of smaller companies in Boeing's supply chain, the U.S. aerospace sector creates 1.5 million American jobs.
"We've already lost hundreds. And frankly, if you go into our supply chain, thousands of jobs have already been lost," said Muilenburg of the dispute over the bank. "People have to realize that not having an Ex-Im Bank has a direct impact on U.S. jobs. Not only that, it has a direct impact on long-term competitiveness in a global world."
Taking that kind of hit would jeopardize Boeing's entire business model. Former CEO Jim McNerney Jr., who's now chairman of Boeing's board, suggested over the summer that the company likely would have to leave the U.S. and relocate elsewhere.
One possibility is Canada -- which, like every other major trading country, has a government-backed bank to help guarantee loans to foreign customers who could not easily get private financing.
The current battle in Congress is a relatively recent controversy. The Export-Import Bank was created 80 years ago, but a group of conservative House Republicans now has it in the crosshairs.
They call it "corporate welfare," even though the bank doesn't cost taxpayers a dime -- and in fact turns a healthy profit because the default rate on its loans is so low. Last year it returned $1 billion to the U.S. Treasury.
"This has nothing to do with corporate welfare," Muilenburg said. "This is about U.S. manufacturing jobs. This is about competitiveness."
But with a small group of Republicans in the House blocking a vote for its reauthorization, the bank's authority to lend money or guarantee loans to customers outside the U.S. expired on July 1.
Since then, Boeing has lost at least two contracts for spy satellites and has started laying off employees in its satellite business. It said the layoffs could affect as many as several hundred employees by year-end.
It has also gotten letters from two long-time Boeing customers -- Ethiopian Airlines and Comair of South Africa -- indicating approximately $3 billion in orders now are in jeopardy because they fear they can't get financing for Boeing planes without Ex-Im.
They've told Boeing they may have to buy from Airbus, which has three export credit agencies supporting customer financing.
Boeing isn't alone. General Electric (GE) has already transferred 500 jobs overseas, so its customers can take advantage of export financing in other countries.
"If the U.S. doesn't have an export credit agency, which is what the Export-Import Bank is, then we can't compete with other countries that do. Every other country in the world that competes in aerospace has an export credit agency," Muilenburg said. "And for customers that need government-based backstop financing, why would the U.S. unilaterally disarm in this globally competitive environment?"