art
Posts: 2727
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No Help For Widget Makers, Why For Plane Makers?

Fri Apr 08, 2005 1:25 am

Widget makers do not receive special financial help to make widgets, so why should aircraft manufacturers receive such help to make aircraft? Would aircraft production cease without this special financial help? No. Aircraft would still be produced. Widget manufacturers would not have to pay extra tax on their profits to subsidise an industry that needs no subsidies anyway.

Any comments on the aircraft industry receiving preferential treatment?

Please, I am talking about the aircraft industry v other industries, not about one aircraft industry v another aircraft industry.
 
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PM
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RE: No Help For Widget Makers, Why For Plane Makers?

Fri Apr 08, 2005 1:35 am

In fact, lots of industries get tax breaks and what have you to attract them. Honda, Toyota and Nissan all manufacture in the UK, for example. The attraction was in part various forms of financial assistance.

Then there's government funded research into various technologies and applications far removed from aerospace.

But another factor must be the sheer scale of designing, building and flying large civil airliners. It's in a league by itself. But what assistance in particular are you referring to?
 
art
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RE: No Help For Widget Makers, Why For Plane Makers?

Fri Apr 08, 2005 1:46 am

Quoting PM (Reply 1):
But what assistance in particular are you referring to?

Any special financial advantages extended to any aircraft industry in order to improve its financial position. The only entities I know that do this are governments.

My point to governments is this: justify taxing widget makers more to extend special financial advantages to aircraft manufacturers who would still make aircraft without this special treatment.
 
AA7771stClass
Posts: 288
Joined: Tue Jun 29, 1999 9:26 am

RE: No Help For Widget Makers, Why For Plane Makers?

Fri Apr 08, 2005 2:31 am

It seems to me that you're talking about pure capitalism. Pure capitalism is like pure socialism: it doesn't exist because it's impossible.

You ask why governments help contribute? Possibly because in the U.S. Boeing is a huge employer as well as a symbol of America. Airbus is no different in Europe. They provide financial assistance (theoretically loaning instead of giving) in order to help the manufacturers undertake the huge capital investment that aircraft design entails. A bank is unlikely to loan billions to a company on an idea (they would need ownership, liens etc.). So the government does it in the interest of "national security" and employment of its people. I believe it would cost you a lot more in unemployment payments were they to let the two manufacturers go sans initial subsidies.
 
art
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RE: No Help For Widget Makers, Why For Plane Makers?

Fri Apr 08, 2005 2:49 am

A bank is unlikely to loan billions to a company on an idea (they would need ownership, liens etc

Quoting AA7771stClass (Reply 3):
A bank is unlikely to loan billions to a company on an idea (they would need ownership, liens etc.).

Why can't a government take part ownership, too, then sell the shares in the market to recover its billions? Better investment than either giving money to the manufacturer (100% loss of capital provided) or providing capital with a risk of losing 100% of it (eg Airbus launch aid model).
 
AA7771stClass
Posts: 288
Joined: Tue Jun 29, 1999 9:26 am

RE: No Help For Widget Makers, Why For Plane Makers?

Fri Apr 08, 2005 3:13 am

Because Margaret Thatcher showed us that privatization was the way of the future. It would be considered counter-revolutionary to take stock in these industries now. I'm not saying I endorse this, just how I see it being in our world...
 
EMBPR
Posts: 17
Joined: Thu Nov 18, 2004 11:24 pm

RE: No Help For Widget Makers, Why For Plane Makers?

Fri Apr 08, 2005 3:58 am

There are vast differences in government "support." In terms of financing aircraft sales through a country's development bank - and all companies do this - there is no real problem. When you talk about tax breaks and incentives to locate or expand a factory, again, all industries receive the same consideration.
The real problem is in governments - taxpayers - funding development programs. This is what Boeing and Airbus are discussing now, and this is what Bombardier plans to do to develop its CSeries. Under the 1992 bilateral agreement between countries representing B and A, up to one-third of development funding could come from governments. That covered only countries signing the agreement and it has been declared no longer in force by Boeing, who wants a new agreement and is threatening WTO action. The US could also include Canada in this claim due to government support of development funding for BBD. Brazil would probably join in.
Here is the issue:
Market forces support market requirements. If a product is desired by the marketplace, the market - through various ways - will fund development. Investors, banks, shareholders - all would see the potential value and fund the program. When governments get involved in development, it becomes a jobs program and there is no real indication of true market need. A company will claim they will repay the "loan" when the product becomes successful, but without a market-driven focus, it may or may not be a success. The taxpayer is stuck with the bill. Also, the company receiving the aid spends less of its own money on NRE and they are able to undercut the price of a competitor product because of this. This is clearly a violation of WTO guidelines.
Companies that make widgets don't get help to design and develop a new, improved widget - but they do get tax incentives to build the widget factory and to export those widgets. It should be the same with aircraft.
This is going to be a major issue between the US and Europe and I will bet Brazil and Canada get drawn into the fight.

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