Businessweek Archives

If Clinton Is Aiming At Airbus, Why Is Boeing Wincing?


Top of the News

IF CLINTON IS AIMING AT AIRBUS, WHY IS BOEING WINCING?

In a giant hangar near Hamburg, Germany, 3,000 spectators applauded on Mar. 3 as Airbus Industrie unveiled its latest challenger to U.S. dominance of the $40 billion airliner market. Europe's new A321 goes nose-to-nose against Boeing Co.'s 757. But behind the hoopla was bitter grumbling. President Bill Clinton is casting Airbus as the leading villain in world trade. That has made the Europeans madder than a traveler with lost luggage. "The Americans are hypocrites," charges an Airbus official.

Clinton's gripe is an old one: Airbus--a joint venture of French, German, British, and Spanish companies--gets government loans to develop its planes and government aid in selling them. Theoretically, George Bush settled the issue last July. After seven years of bargaining, the Europeans agreed to limit aid to 33% of a plane's development cost. Now, Clinton is reopening an old wound by challenging the agreement. And three U.S. senators are rubbing salt in it. Senator John C. Danforth and two others have introduced a bill that could lead to dumping duties on Airbus planes.

SOLO FLIGHT. The brawl is a stunning example of Clinton's don't-tread-on-me bravado that's spreading trade-war fears from Brussels to Tokyo. His U.S. Trade Representative, Mickey Kantor, says the Administration means business: "There are still subsidies in there. The agreement needs to be reviewed," he says. As a counterweight to Airbus, Washington is also mulling aid to U.S. planemakers.

What's striking about Clinton's attack is that he's gunning for Airbus on his own, with little prodding from Boeing or McDonnell Douglas Corp. Indeed, Boeing executives publicly seem anxious to tone down the President's zeal, fearing a backlash in the lush European market. Since 1988, Boeing has sold 707 planes in Europe, vs. 296 for Airbus in the U.S. McDonnell, too, fears U.S. actions could do more harm than good.

Both U.S. companies say the Airbus agreement is acceptable as it stands--as long as it's enforced. In fact, Boeing opposes the Danforth antidumping bill, since Europe would match--or escalate--sanctions. "A trade war would not be in our best interests," says Boeing Vice-President Lawrence W. Clarkson.

Boeing executives think Clinton was goaded into action by their announcement of 28,000 job cuts on Feb. 18--the day after he unveiled his economic plan. He invited himself to Boeing on Feb. 22. Company officials gave him a "wish list" to prevent further cutbacks, headed by help for U.S. airlines. Vigilance on Airbus was a lesser request. But Clinton chose to focus on Airbus in a campaign-style speech to workers.

If he does reopen the agreement, it may be an empty gesture. "There's not much left to negotiate," says Carla Hills, the former U.S. Trade Representative, who won last year's deal. Little can be done about past aid: $13.5 billion over 23 years, or $26 billion with interest, in Washington's view. As for future aid, Boeing and the Airbus partners are discussing building a 600-seat superjumbo jet jointly. So Boeing could benefit from its partners' deep government pockets.

That may help explain why the U.S. giant has a more modest goal: making sure Airbus repays its loans. Each time the consortium delivers a plane, it sends cash to government lenders. On all its programs, Airbus claims to have paid back $3.5 billion, with annual payments of $800 million projected through 1997.

INDIRECT AID. But the payments may not be enough--and there's no proof the numbers are accurate. Boeing wants Washington to probe Airbus' books, as it won the right to do in last year's pact.

For Airbus, this is a case of the pot calling the kettle black. Its partners get military work, but they claim Boeing and McDonnell get far more in indirect aid: $41 billion since 1976 in research contracts and fallout from defense work.

Such conflicts stayed on the back burner as long as airlines were buying planes. But with orders down, Boeing fears that Airbus will persuade United Airlines Inc. to cancel part of its $22 billion order for 747s and 777s and take Airbus planes instead. Some wonder if Clinton's attack on Airbus is an orchestrated move to tip United toward patriotism. Boeing claims not.

Europeans hope Clinton will back off. "He's just not well informed," says an official of Deutsche Airbus. Maybe not, but Clinton seems determined to give U.S. plane builders some help--whether they want it or not.Stewart Toy in Paris and Dori Jones Yang in Seattle, with Douglas Harbrecht in Washington


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus