On the balance Airbus is hurting from the strong euro, even though many of the raw materials they're using (aluminium etc) are priced in dollars, and they subcontract a lot to suppliers in the US. On the other hand if Airbus is forced to become leaner as a result of this, they should be in excellent shape when the dollar strengthend again.
N1786b From United States of America, joined Sep 2005, 558 posts, RR: 17 Reply 4, posted (6 years 3 months 17 hours ago) and read 4083 times:
Considering they claim that some Airbus planes have more American content than some Boeing planes, you'd think Airbus would be happy. Why are they complaining?
According to Bischoff, the aerospace industry had become increasingly global, undermining the concept of national products.
"EADS is one of the largest customers of the US aerospace industry, buying $6 billion of equipment in the US, and Airbus products have more American content than some of Boeing's products," he said. "If you have an A-380 with a GE engine against a 777 with a Rolls-Royce engine, I bet you have more US content in ours."
N1786b From United States of America, joined Sep 2005, 558 posts, RR: 17 Reply 7, posted (6 years 3 months 16 hours ago) and read 3870 times:
Come on, Joni - he said I bet - yeah, so it was just a soundbite for the press.
According to their web site, 46% of their overseas procurement comes from North American companies (yeah, I know that includes Canada).
More precisley and I quote:
In 2006, Airbus spent $10.2 billion on parts, components, tooling and services with American companies. The United States is the largest single supplier country to Airbus, making Airbus the largest export customer for the U.S aerospace industry. A large part of this business is dedicated to the A380, so the supplier figures in terms of dollars and people, are set only to grow as the A380 becomes more commonplace at airports worldwide.
With the drop in the value of the dollar, they ought to be happy - the cost of doing business with the US is going down. As a matter of fact, if the value of the US dollar says around this level - they will be doing more work with the US. IMO the "dollar is causing Power8" is more or less a smokescreen to allow politicians and management to make tough and unpopular decisions. It is always easier to blame the USD or simply complain about the dollar and competitiveness. Their touch labor and cost base is in Euros and the exchange rate is not helping them. But look what other manufacturers (and Airbus itself is doing in China, and the US - Eurocopter) have done - establish a mfg presence in the US. Just look at the car makers in the US now.
I'm not saying the lower dollar isn't hurting them. However, you can't have it both ways - claiming, bragging, or saying that the US content is huge then complain that a lower dollar is really hurting you and causing such a vast and profound reorganization.
Interestingly enough this just hit the wires as I was writing my reply:
Bregier said Airbus' competitive disadvantage from the exchange rate "is starting to be realized at the political level, and that's very important."
Airbus will have to increase its purchasing from dollar-based suppliers, to the detriment of those in Europe, Bregier said. Another option would be to relocate production outside the euro zone, he said.
Joni From , joined Dec 1969, posts, RR: Reply 8, posted (6 years 3 months 16 hours ago) and read 3836 times:
Quoting PanHAM (Reply 6): It is a commodity traded in $$. The price is affected by market supply and demand, not by the $$ value.
True, but the oil-producing countries receive the dollars paid for the oil, and that the USD-price of oil tends to increase when USD is weak is a known phenomenon.
Quoting N1786b (Reply 7): I'm not saying the lower dollar isn't hurting them. However, you can't have it both ways - claiming, bragging, or saying that the US content is huge then complain that a lower dollar is really hurting you and causing such a vast and profound reorganization.
You're comparing an offhand comment to the cost structure of a huge enterprise as if they're datapoints of equal credibility, which doesn't IMO make much sense.
Your own quote demonstrates this - the North American part (CA included) is less than half their overseas procurement, which again is less than 100% of the value they produce. Therefore it's impossible that more than half of their costs would be in USD.
N1786b From United States of America, joined Sep 2005, 558 posts, RR: 17 Reply 9, posted (6 years 3 months 15 hours ago) and read 3714 times:
Quoting Joni (Reply 8): You're comparing an offhand comment to the cost structure of a huge enterprise as if they're datapoints of equal credibility, which doesn't IMO make much sense.
OK, I'll start ignoring "offhand" comments from Airbus senior executives. I should have learned my lesson when I took Leahy seriously.
Looks like I should have ignored Hertrich as well.
"(he) rose one last time when the subject of the Air Force tanker deal and U.S. jobs was raised again.
He said the commercial jet that would be modified for an EADS tanker, the Airbus A330, already has 40 percent U.S. content; the amount would grow to more than 50 percent for the tankers."
And we agree that if the amount of $10.2 billion per year is but part of their outsourcing. But to put it in perspective as to how important it is:
"In industrial cooperation with China, Airbus is not only committed to technology transfer, but also committed to increasing procurement and R & D. The value of procurement from China per annum, in respect of existing programmes, is projected to reach $ U.S. 120 million dollars by 2010, doubling the $ U.S. 60 million target for the year 2007."
What I am trying to say is that by complaining about how bad the dollar is hurting them, the executive and marketing messages about American content of Airbus planes and programs have to be taken with a grain of salt.
Quote: Europe's plane maker, Airbus, has warned it may have to slash costs by €1bn and take drastic steps to shift production overseas as the dollar's fall shatters its business strategy. . . .
Airbus earns all its revenues in US dollars, with delivery contracts signed long ago worth over $200bn. Its labour costs are mostly euros. The company has been shielded until now by currency hedges but these will fall from $15.7bn in 2007 to just $1.1bn by 2011, leaving Airbus exposed
Norbert Walter, Deutsche Bank's chief economist, said the euro was now seriously overvalued. "Even at $1.35, the exchange rates was damaging European growth. Now the pain is going to be even worse," he said.
And BTW, a hedging strategy costs real money. If Power 8 was looking difficult before. . . .
"When all is said and done, more will be said than done".