Business

July 3, 2012

Airbus to build first U.S. assembly plant in Alabama

by Melissa Nelson-Gabriel
Associated Press

In the battle to dominate the global aviation industry, European aerospace giant Airbus announced its first assembly plant in the United States July 2, a symbolic and significant step in the competition with archrival Boeing.

The French-based company said the Mobile, Ala., plant is expected to cost $600 million to build and will employ 1,000 people when it reaches full production, likely to be four planes a month by 2017.

“We are going to create great jobs and generate growth right here,” Airbus CEO Fabrice Bregier said at the convention center in Mobile, where many of the 2,000 people in attendance waved American flags as music played in the background.

“We know in aerospace, when we create one job, there are about four related jobs so we could bring as many as 5,000,” Bregier said at a later news conference. “The management to the blue collars will be 100 percent American.”

Boeing already has a big presence in Alabama, employing 2,700 people in defense and rocket operations.

Airbus planned to build refueling tankers for the U.S. Air Force in Alabama, but its parent company, the European Aeronautic Defense and Space Co., lost the contract to Boeing in 2011.

While Airbus had parts plants in the U.S. before, a full-fledged plane-making factory is a more significant presence and could help it boost its share of U.S. commercial and defense contracts.

The Airbus plant advances the company’s strategy of expanding production outside its home base. The company, jointly run by French and German management and with plants in several European countries, wants to expand in China and India as well as the United States.

The Alabama is also a way for Airbus to save face after losing the Pentagon tanker contract.

The companies have had a long-running international trade dispute. Each also has been critical of subsidies received by the other.

EADS shares have being climbing on European markets since news of the Alabama deal surfaced last week.

Airbus plans to manufacture the A320, a widely used plane flown by Delta Air Lines, US Airways and others. The 150-seat plane is generally used on short- and medium-haul flights, and Airbus makes more of them than any of its other planes. They retail for $88 million, although discounts are common for big customers.

The Mobile operation will join Airbus assembly plants in in Toulouse, France; Hamburg, Germany; and Tianjin, China.

The southern region of the United States is traditionally unfriendly to unions, which will likely mean lower labor costs compared with the company’s other factories in France and Germany.

“Clearly we selected a competitive environment and we are businessmen so we don’t go to the worst place,” Bregier said.

Airbus unions have expressed concern about European jobs lost to the United States, a particularly thorny issue in France as new President Francois Hollande tries to re-invigorate manufacturing at home.

Other big manufacturers have found homes in the South. Boeing has a plant in North Charleston, S.C., and Alabama is home to plants owned by Mercedes-Benz, Honda, Hyundai and Toyota.

Mercedes’ plant was so successful that it was soon followed by Honda and Hyundai assembly plants and a Toyota engine plant that reshaped the manufacturing economy in a state still reeling from the loss of textile and apparel jobs.

Mobile is already home to several aerospace companies, including ST Aerospace Mobile, Goodrich Aerospace and Star Aviation, and much of the business is based at the 1,650-acre Brookley Aeroplex, where the new plant will be based. The aeroplex was an Air Force base until its closure in 1969.

While Airbus looks to boost production of its A320, Boeing is ramping up production of its 737, which competes directly with the A320. Both companies are putting new, more fuel-efficient engines on the planes, hoping to extend their appeal as airlines try to cut fuel costs. Airbus made its new-engine decision earlier than Boeing and got a big jump on orders.

The U.S. is a growing market for Airbus. American Airlines ordered 260 A320s last year, and US Airways is buying them as well. However, Delta went with Boeing 737s in a 100-jet order in August.

Airbus already has a facility in Mobile that employs about 230 people designing and installing interior items such as seats and cabin equipment for its big planes.

The Airbus announcement comes as Alabama struggles to recover from the recession. Unemployment has dropped from 10.0 percent in July 2011 to 7.4 percent in May, but part of that drop came from people leaving the work force rather than finding jobs.




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