mrcomet
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Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 12:34 am

Airbus has said they need to cut costs (1.5 billion Euro) to deal with the weak dollar. Will this affect decisions on the A350 and other programs? Why does EADS use the dollar anyway with a strong Euro?

fair use:
=====
"In 2005 the negative impact of the dollar was 720 million euros at the level of EADS and 670 million euros at Airbus ," EADS co-chief executive Noel Forgeard told the company's annual shareholders meeting.

and

Some analysts are nonetheless concerned that dollar exposure will squeeze Airbus as it continues large-scale developments, including a possible redesign of the recently launched A350, which is being outsold by Boeing's 787 Dreamliner.
---

http://today.reuters.com/business/ne...basicIndustries&storyID=nL04594720
[Edited 2006-05-04 17:35:45]

[Edited 2006-05-04 17:37:00]
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boeingbus
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 12:59 am

Quoting MrComet (Thread starter):
Why does EADS use the dollar anyway with a strong Euro?

This allows Airbus to better compete with Boeing. Airbus also purchases tons of meterials and parts from the US. Also, these eases any concerns for Airlines concerning currency fluctuations.
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ScottB
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 1:03 am

Quoting MrComet (Thread starter):
Why does EADS use the dollar anyway with a strong Euro?

Probably because it's what the customers expect. I'm sure they'd quote a price in Euro if the customers demanded it.
 
nijltje
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 1:20 am

As Boeing is also buying tons of materials in the EU! So not really an fixed advantage. You can only hope to have a high Euro or Dollar so Boeing will have the advantage for the moment.
 
boeingbus
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 1:27 am

Quoting Nijltje (Reply 3):
As Boeing is also buying tons of materials in the EU! So not really an fixed advantage. You can only hope to have a high Euro or Dollar so Boeing will have the advantage for the moment.

Yes, but when the A380, the Airbus flagship, is almost 50% US made... Getting paid in dollars for A380 delivery will only have a 50% exposure to the Euro. This is my point...

Global companies will always buy parts from everywhere but Airbus does buy lots and lots parts of the states.
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mrcomet
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 1:30 am

Quoting BoeingBus (Reply 1):
Probably because it's what the customers expect. I'm sure they'd quote a price in Euro if the customers demanded it.

What is that supposed to mean? Sorry for the rant but I am not sure you have visited the rest of the world lately: EVERYBODY is dropping the dollar like an angry snake. Oil is leaving the dollar...and soon airplanes will leave the dollar. It's unstable and America is bankrupt (although everybody there except most of its Noble-winning economists don't seem to know it yet). The US is what Argentina was -- a country without the political will to curtail spending or raise taxes. The US owes the world $3.7 trillion of its increasingly weak currency -- that's a third of its GNP!!! And it's growing at such a rate the US can't even afford to pay its INTEREST on its debt.

The business trade magazines say the dollar is expected to plunge versus the Euro. Some people might "have to" use it some industries but the dollar but is a last century currency. This will help Boeing over Airbus.

Here is a nice discussion: http://www.epinet.org/content.cfm/Issuebrief203
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Ken777
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 1:57 am

CEOs are paid big dollars to manage problems like this. "Cost cutting" might actually be to purchase materials from countries that have their currency tied to the US$, rather than eliminating people, or the tools they use to make the planes better. It might be investing in increased computer power, or getting better at hedging against the dollar.

They also have to responsibility to improve performance in various Divisions, like Sogerma. AA management actually worked with the unions at their maintenance center in TUL and they all worked together to find ways to improve the performance (especially on the P & L) and save jobs. The result is a maintenance center that is actually profitable and starting to do outside work.

Looks like it's time for Forgeard to earn his pay.
 
nycflyer
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 2:09 am

The weak dollar obviously helps Boeing and hurts Airbus. Boeing planes are comparatively cheaper for the rest of the world. Therefore, Airbus may feel pressured to lower their prices, and find cost-cutting measures to enable those price cuts. That's what I'm sure this is about.

Quoting MrComet (Reply 5):
What is that supposed to mean? Sorry for the rant but I am not sure you have visited the rest of the world lately: EVERYBODY is dropping the dollar like an angry snake. Oil is leaving the dollar...and soon airplanes will leave the dollar. It's unstable and America is bankrupt (although everybody there except most of its Noble-winning economists don't seem to know it yet). The US is what Argentina was -- a country without the political will to curtail spending or raise taxes. The US owes the world $3.7 trillion of its increasingly weak currency -- that's a third of its GNP!!! And it's growing at such a rate the US can't even afford to pay its INTEREST on its debt.

Despite your rant being wholly off-topic, it's mostly true. But you'd be surprised how many of the world's wealthiest countries run a current account deficit, and those with CA surpluses aren't necessarily better off.
 
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Stitch
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 3:12 am

Quoting MrComet (Reply 5):
Sorry for the rant but...(s)ome people might "have to" use it some industries but the dollar but is a last century currency. This will help Boeing over Airbus.

You may not like the fact that many of the world's transactions are handled in US currency, but that nonetheless is the fact.

So Airbus has to purchase dollars, just as Japan does, even though in the 1980's when the US economy was also in flames the "experts" said the Yen would become the new world currency.

Airbus has done a magnificent job in hedging the Dollar, which has helped push this issue back as long as it has, but two years ago I remember reading reports that around 2007 Airbus would start to feel the squeeze of a high Euro, just as Boeing did shortly after the Euro's introduction when it was trading below a US dollar.
 
A319XFW
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 3:46 am

Quoting MrComet (Thread starter):
Why does EADS use the dollar anyway with a strong Euro?

Because aircraft are sold in dollars, too.
 
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 4:14 am

Quoting MrComet (Reply 5):
that's a third of its GNP!!! And it's growing at such a rate the US can't even afford to pay its INTEREST on its debt.

So what you are saying is, the US debt is relatively small compared to its enormous GNP. It's a lot of money, but not an unhealthy ratio. Could be paid off in no time. The problem is, the government has no desire to pay it off... because it is a rogue regime.
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 4:18 am

Quoting Supa7E7 (Reply 10):
So what you are saying is, the US debt is relatively small compared to its enormous GNP. It's a lot of money, but not an unhealthy ratio. Could be paid off in no time. The problem is, the government has no desire to pay it off... because it is a rogue regime.

I guess the German, French, Italian, Japanese and numerous other governments are all rogue regimes as well, as they have greater debt to GDP ratios.
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saturn5
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 4:20 am

Quoting Supa7E7 (Reply 10):
off... because it is a rogue regime.

Do you know what "rogue" regime even means?? What kind of nonsense it is.
 
art
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 4:29 am

Quoting Atmx2000 (Reply 11):
I guess the German, French, Italian, Japanese and numerous other governments are all rogue regimes as well, as they have greater debt to GDP ratios.

You're talking domestic debt, aren't you, not foreign debt? If I remember correctly, Italy's national debt exceeded its GDP.
 
Poitin
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 4:31 am

Quoting A319XFW (Reply 9):
Quoting MrComet (Thread starter):
Why does EADS use the dollar anyway with a strong Euro?

Because aircraft are sold in dollars, too.

A319XFW is quite correct -- airliners and Oil are quoted USD, or at least may be for a while yet. Will the Euro replace the dollar, maybe. We will see.

Airbus has hedged their money until 2007, so the 20% or so increase of the Euro in the last few years has not really hurt them -- yet. But their hedge funds are drying up so unless something changes, Airbus as yet another problem.
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saturn5
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 4:33 am

I read somewhere that Euro still doesn't have "liquidity" necessary for it to become the standard currency for international transactions. The US dollar is still favored.
 
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lightsaber
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 4:52 am

Quoting MrComet (Reply 5):
Some people might "have to" use it some industries but the dollar but is a last century currency.



Quoting Saturn5 (Reply 15):
I read somewhere that Euro still doesn't have "liquidity" necessary for it to become the standard currency for international transactions. The US dollar is still favored.

The liquidity of a currency is based upon the native economy that currency is supported by (GNP) as well as those sattelite economies that trade heavily in that currency.

You might not like the dollar but I still find that almost everywhere in the world two currencies are accepted: The local currency and the dollar. While the dollar is weakening... Until *all* of Europe, including Sweden and Britain, unite under the Euro, there will be more people willing to trade in dollars than Euros.  spin 

I do expect that within 20 years we'll be back to the situation where two currencies are utilized to facilitate world trade. Once upon a time it was the British pound and the dollar. In the future? Its quite possible that Chinese currency will dominate in Asia, the Euro in Europe, and the Dollar in North America. But how will they trade amoung themselves? I expect the dollar will still be strong for that but EU-Asia to be in Euros. Just my  twocents 

Fully on topic: Most non-European countries sign aircraft purchase contracts in dollars. I've yet to hear of a contract from Asia, Australia, South America, or the middle east signed in Euros. If you have a link to one, please share. I have no doubt LH and others now buy aircraft in Euros...

Quoting Supa7E7 (Reply 10):
So what you are saying is, the US debt is relatively small compared to its enormous GNP. It's a lot of money, but not an unhealthy ratio. Could be paid off in no time. The problem is, the government has no desire to pay it off... because it is a rogue regime.

Good god. Congress spends the money! Read the constitution... Man, what have education standards dropped to...

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boeingbus
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 5:09 am

Quoting Lightsaber (Reply 16):
Good god. Congress spends the money! Read the constitution... Man, what have education standards dropped to...

Well, I personally include congress in this called rogue regime... So Supa7e7 is right... its regime... and not just one person but many idiots running the show.. sad.
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mrcomet
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 5:46 am

My understanding is that while oil is officially traded on markets in dollars, that there is strong pressure to change this. Many countries work bilaterally directly in euros now which has led to some of the dollars drop. Iran is actually trying to set up a euro-based oil trading exchange. Other ME countries are also planning such exchanges. The problem is not ideological but financial. The Bush regime has allowed relatively wild swings in the dollar which fouls up everybodies world. In the past, the US made many more attempts to keep the dollar steady.

Why this matters is that many countries must keep either dollars (fairly small amounts relatively speaking) or US investments (rather large amounts) to buy oil on the world market. This forces the world to invest in America. Clever. The growth and innovation in US markets made this okay for everyone for years. However, the US debt, currency instability, and a general lack of trust in the people who now run the US economy is making people question that.

Experts say the dollar will drop again significantly because of the US debt. That will force more people to trade in Euros which will pull more international investment out of the US and suddenly no one will be paying to sustain US consumers. It will likely happen very quickly and over a matter of weeks or months. The dollar could drop in half in value.

Boeing, while it might benefit in relative costs, might find the severe resulting recession will be far more damaging than any gains.
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saturn5
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 5:58 am

Quoting MrComet (Reply 18):
That will force more people to trade in Euros which will pull more international investment out of the US and suddenly no one will be paying to sustain US consumers. It will likely happen very quickly and over a matter of weeks or months

This sort of doomsday scenerio although widely distributed on internet by US-haters (who can't wait to see it happen) has been widely dismissed by most international financial experts writing for magazines like Financial Times, WSJ and Economist. Keep on dreamin ....  Yeah sure
 
deltadc9
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 6:00 am

Quoting MrComet (Reply 5):
And it's growing at such a rate the US can't even afford to pay its INTEREST on its debt.

Source?

Quoting NYCFlyer (Reply 7):
. But you'd be surprised how many of the world's wealthiest countries run a current account deficit, and those with CA surpluses aren't necessarily better off.

Exactly, George was wise to allow deficit spending as a rule. George WASHINGTON that is. Seems like 200 years of mostly deficit spending hasn't been all that bad an idea considering the 11 trillion GDP.

Every year there will be expenses like natural disasters, epidemics, and other events that cannot be put in a budget because they may not happen. Because of this, we will always be prone to borrow. That's how the economy works, it is based on debt. How many jobs would be lost if the national debt did not exist? You cant plan for everything, and if you include funds for unforeseen events, they will be spent no matter what.

Quoting Atmx2000 (Reply 11):
I guess the German, French, Italian, Japanese and numerous other governments are all rogue regimes as well, as they have greater debt to GDP ratios.

Debt is an industry that contributes to GDP, ironic ain't it?
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Braybuddy
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 6:13 am

Quoting NYCFlyer (Reply 7):
The weak dollar obviously helps Boeing and hurts Airbus

Not necessarily. With 35 per cent of the 787 workshare coming from Japan, plus other components made outside the USA a weak dollar is going to hurt Boeing too. Gone are the days when an aircraft is made in one continent, let alone country.
 
andessmf
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 6:14 am

Quoting Saturn5 (Reply 19):
This sort of doomsday scenerio although widely distributed on internet by US-haters (who can't wait to see it happen) has been widely dismissed by most international financial experts writing for magazines like Financial Times, WSJ and Economist. Keep on dreamin ....

Ahhh, the good old days. Does remind me of the same talk 20 years ago about Japan. There was a lot of talk about how the US had to change and do things the Japanese way, how Japan was buying all the good properties, etc. And what has happened to Japan in the last 15 years?

There are many different ways of looking at debt. Right now, I owe $250,000 dollars on my house, for example. But I only make a third of that a year. Does it mean that I am spending way beyond my means? No.
 
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 6:52 am

Quoting Lightsaber (Reply 16):
I do expect that within 20 years we'll be back to the situation where two currencies are utilized to facilitate world trade. Once upon a time it was the British pound and the dollar. In the future? Its quite possible that Chinese currency will dominate in Asia, the Euro in Europe, and the Dollar in North America. But how will they trade amoung themselves? I expect the dollar will still be strong for that but EU-Asia to be in Euros. Just my

I blame Dr. Sir Alan Greenspan for single-handedly possibly destroying the dollar with his financial policies......or should I say, reckless financial policies......can't say too much of current Federal Reserve Chair Ben Bernanke either, but his "helicopter printing press" doesn't leave me all too sanguine either... no 

Also, removing the dollar from the gold standard didn't help....as the dollar can now basically be considered a form of "fiat currency" backed by the promise of the United States Govt/Federal Reserve.....which by the way, is a scary thought... spin 
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BoomBoom
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 7:09 am

Quoting MrComet (Reply 5):
It's unstable and America is bankrupt (although everybody there except most of its Noble-winning economists don't seem to know it yet). The US is what Argentina was -- a country without the political will to curtail spending or raise taxes.

Oh yes, maybe America should strive to be like Germany and France. High unemployment, low growth, declining population. Or maybe like that bastion of peace and stability, Bosnia and Herzegovina. Yes, that's something to strive for. NOT!
Our eyes are open, our eyes are open--wide, wide, wide...
 
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Stitch
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 7:55 am

Quoting MrComet (Reply 18):
Experts say the dollar will drop again significantly because of the US debt. That will force more people to trade in Euros which will pull more international investment out of the US and suddenly no one will be paying to sustain US consumers. It will likely happen very quickly and over a matter of weeks or months. The dollar could drop in half in value.

If it does, China's screwed because we soak up so much of their output. On the other hand, the EU raises all sorts of trade and protectionist barriers against Chinese imports (compared to the US).

It's one of the reasons China continues to buy so many of our Treasury bonds with the monies they make from exporting to us - to keep their largest market humming along, happily consuming.
 
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lightsaber
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 9:53 am

Quoting Stitch (Reply 25):
If it does, China's screwed because we soak up so much of their output. On the other hand, the EU raises all sorts of trade and protectionist barriers against Chinese imports (compared to the US).

Simply put, the US has a quick answer to strengthen the dollar. I think most of us know the biggest weakness to the US economy right now is partially due to China being unwilling to float their currency. Eventually they will have to float the market.

Airbus also has no choice but to trade in dollars. Ok, let's forget subsidies for a moment... Ok? Yes, we're going to be civil and just forget them.

Ok... You do realize airbus and the companies that supply airbus (or are the components of airbus) must borrow huge sums of money on the open markets? Now where does one go to borrow a few billion in the open market (forget whatever is loaned by governments)? In the US one can go the huge Bond markets, the NYSE, the Nasdaq, GE, Burkshire Hathaway, a few dozen (more?) Hedge funds, the big investment banks (Wells Fargo, Chase, etc.) and I'm sure I forgot something. In Europe, there are a dozen or so London based mutual funds and a few big banks that admitadly are huge. But if you want the lowest borrowing costs, companies will follow Sarbanes-Oxly and qualify to do a US based stock or bond offering. I'm not talking about when Airbus (or a vendor) must borrow $100 million... that's easy. I'm talking about when they need to borrow say $5 billion...

Like it or not the world markets are tied in an imperfect fashion. So Airbus is being hurt due to the dollar being weak. A few years ago Boeing was hurt due to the dollar being strong. Remember when the Euro and dollar were at around parity? Now the Euro is strong and the dollar is weak. Cest la vie.

There will be cycles. Aerospace companies will continue to source all over the world. For example, most people don't know that FIAT is very strong in the engine gear and gearbox markets. Ok... no biggie, they make an excellent product. As an American do I rant and rave about it? Nope. I simply always have them on the vendor short list for certain types of aerospace gearboxes whenever one is needed in a design. That's all.

Do I think the US will have economic troubles some day? Sure. But we'll lay people off, they'll go get retrained, and some new industry will spring up here that will soak them all up. What? I have no idea. Who would have predicted computers, the internet, bio-tech, and a dozen other industries a decade before they got big? Not me. We simply have a system that encourages the formation of "garage industries" and I have no doubt another one will form and their workers will need to get on airplanes to do business or get time off for some R&R. And I cannot help but notice how many of those companies are founded by those who were naturalized as US citizens...  scratchchin  And maybe one of these will supply some new widget for aircraft. I somehow doubt the hoard of foreign grad student who study here will all go home.  Wink I know too many who are raising families here in the states. And yes, I know expatriate Americans who now live in France, Germany, Japan, Hong Kong, Australia, and a dozen other places. Don't flag wave too much... This world is more connected than you know. Oh, I'm proud of my country, but I also go to a supermarket where I once counted people from 25 different home countries (I was bored in a long line, ok?).

But there shouldn't be this constant trans-Atlantic bickering on a.net. We buy from each other. Each side has its strengths. For certain precision machine tools, US companies still have no choice but to head to Germany or Switzerland to purchase them. British engineering remains a bastion of creativity. The french have long been famous for elegant structures, etc. For certain carbon fiber machine tools the US is the only vendor. Good luck buying enough single crystal turbine blades without buying them in the US... I've seen the RR production line at Hitchner in New Hampshire. The ones being made in the room over from Pratt and the other side of GE. (There is a reason that companies aerospace work is split into "red/white/blue" teams with "firewalls" between them.) And do I need to tell anyone about outsourcing to Asia? You might as well embrace world trade... its what makes the commercial aircraft industry possible.

Lightsaber
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SEAPlane10
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 10:26 am

Quoting MrComet (Reply 5):
What is that supposed to mean? Sorry for the rant but I am not sure you have visited the rest of the world lately: EVERYBODY is dropping the dollar like an angry snake. Oil is leaving the dollar...and soon airplanes will leave the dollar. It's unstable and America is bankrupt (although everybody there except most of its Noble-winning economists don't seem to know it yet). The US is what Argentina was -- a country without the political will to curtail spending or raise taxes. The US owes the world $3.7 trillion of its increasingly weak currency -- that's a third of its GNP!!! And it's growing at such a rate the US can't even afford to pay its INTEREST on its debt.

The business trade magazines say the dollar is expected to plunge versus the Euro. Some people might "have to" use it some industries but the dollar but is a last century currency. This will help Boeing over Airbus.

This erroneous tirade ends on an ironic note..."This will help Boeing over Airbus"...I guess Boeing and other related firms have little impact in the balance of trade....
 
mrcomet
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 6:10 pm

Quoting BoomBoom (Reply 24):
Oh yes, maybe America should strive to be like Germany and France. High unemployment, low growth, declining population. Or maybe like that bastion of peace and stability, Bosnia and Herzegovina. Yes, that's something to strive for. NOT!

Don't get me wrong. I am not a US hater as accused. I lived there. I know it well. Allow someone to disagree or criticize without accusing them of hatred. Secondly, I would never offer Bosnia-Herzegovina as a model of efficiency or order so I won't agree to the hypocrite label. We have yet to create a real economy or a environment for legal business for that matter.

So getting back to whether a sinking dollar will help Boeing, I think everyone believes it will especially Airbus which is cutting costs to deal with it. Boeing will not get as much advantage as they used to if they use their outsourcing model on all future airplanes. Much of the 787 is made abroad.



Quoting SEAPlane10 (Reply 27):
This erroneous tirade ends on an ironic note..."This will help Boeing over Airbus"...I guess Boeing and other related firms have little impact in the balance of trade....

Not as much as they used to with the 787. They're importing most of the pieces. All Boeing will contribute to the BOT is the value of the assembly and the profit.
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deltadc9
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RE: Airbus: Weak Dollar Hurting Costs

Fri May 05, 2006 10:43 pm

Quoting Lightsaber (Reply 26):
You might as well embrace world trade... its what makes the commercial aircraft industry possible.

Your understanding of economics and trade is impressive. Excellent post.

I explained in another post somewhere that it is inherently American to embrace foreign technology when it is in our best interest to do so, examples being the German main gun on the Abrams tank, British innovations in aircraft carrier design, French expertise in getting the California winery's to be world class, Italian expertise for sports car design (CorvetteFerrari Daytona), the Harrier Jump jet, and the fact that our whole whiskey industry is base on the Irish recipes and methods. We not only embrace it, we are proud of the fact that we use it.

This is what makes the whole A-330 tanker argument so silly, its simply not in our best interest. The fact that it wont happen had nothing to do with th fact its Airbus, its that we have a plane already that is perfectly suited, in fact we have 3 or 4. The 380 bickering is just as silly because almost half of that plane is made in the USA if it doesn't have RR engines.

Shake the family tree of almost anything and you will find global content, even if its just the energy to produce it.
Dont take life too seriously because you will never get out of it alive - Bugs Bunny
 
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lightsaber
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RE: Airbus: Weak Dollar Hurting Costs

Sat May 06, 2006 12:44 am

Quoting DeltaDC9 (Reply 29):
This is what makes the whole A-330 tanker argument so silly, its simply not in our best interest

First, I enjoyed reading your post and thank you for the compliment. I like your analogies on production. I would expand and say that now we have UC Davis talent going back to France to improve their winery production too!  Smile Ok, I'm proud of the California wine industry.  spin  But yes, Americans love to incorporate new ideas and we don't care where they came from.

Alas, on the A330, I'm afraid we must disagree. Boeing got their hand caught so deep in the cookie jar milking the first 767 tanker for profit that their competitors are taking advantage of how much of the A330 is American made. Why? The proposal for the A330 tanker meets the military procurement requirements under the "Buy America" act. I honestly think we'll see both the 767 and 330 as US tankers.

As to the A380, yes it does have a high US content, but enough non-US that a weak dollar hurts sales more than it helps costs.  Sad

Lightsaber
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Zkpilot
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RE: Airbus: Weak Dollar Hurting Costs

Sat May 06, 2006 1:17 am

Quoting MrComet (Reply 5):
The US owes the world $3.7 trillion of its increasingly weak currency -- that's a third of its GNP!!! And it's growing at such a rate the US can't even afford to pay its INTEREST on its debt.

What a crock of sh*t... Japan and several other countries actually owe more than their GNP! Yes the US is borrowing at a rate beyond which it should be (any economist will tell you this), but because it is such a large country, large economy and large population the amount of debt is relatively small in comparison. What is perhaps of more concern to the US is its current account deficit... Increasing debt is ok (as a lot of it is invested in plant and equipment and to fund improvements that improve productivity). The US is one of the most productive countries in the world per person and definantly is if you compare the country as a whole.
The fact that most of the world uses the US$ for transactions etc allows the US to have a high dollar. A high dollar is bad for most countries because it destroys the ability to export. Because of its preeminant size this does not happen in the US to the same extent. There are industries in the US that are ONLY in the US because of its size. Same goes for multinationals... they are based in the US because it is the worlds largest economy (and thus some of their profits from abroad end up in the US). Anyways... back to the high US$ as mentioned the US has high productivity and high productivity growth. Economics 101 will tell you that if a country has a strong dollar it can have low interest rates, if a country as a weak dollar it needs high interest rates to attract investors. Because everyone uses the US$ it is strong, allowing low interest rates which in turn allow US companies cheap finance rates to invest in equipment to increase productivity. The low interest rates also allow consumers access to cheap loans for houses, cars, plasma tvs etc.

Now the US has got to the point where it is borrowing a lot more than it should be to pay for all these consumer items primarily from China. The Yuan (Chinese currency) is artificially kept low by the Chinese government (for the purposes of making Chinese exports more competitive). If the Yuan was floated, it would immediatly climb about 20% (if not more) and the US$ would fall about 5-10%. This would have an impact (about 3 months later) in the US of Chinese goods being much more expensive, whilst US made goods or Japan made goods would become more competitive. What this means of course is that the US would start consuming its own products more, import less from China, and export more to other countries because its $ would be less. Because the $ would be weaker, The Federal reserve would have to increase interest rates by about 0.5%. This would make finance more expensive for consumers thus reducing consumption and reducing the US current account deficit. Boeing would find it easier to export to other countries and would be at an advantage to Airbus (although some costs would rise from foreign components).
Since oil is priced in US$ it would not matter much to most countries as the price in US$ would go up but US$ would be cheaper in their own currencies. In the US however prices for gas would go up about 5-10% and US consumers might finally get out of their gas guzzling SUVs, trucks, large cars, and might finally start driving normal sized cars like the rest of the world, and improve their rate of using public transport (something which my fellow Aucklanders in New Zealand need to do also...rail use is up 40% this year tho).

whoa that was long...hope it wasn't too boring, hope it was clear and explains it all.  Smile
56 types. 38 countries. 24 airlines.
 
andessmf
Posts: 5689
Joined: Wed Jan 25, 2006 8:53 am

RE: Airbus: Weak Dollar Hurting Costs

Sat May 06, 2006 1:18 am

Quoting MrComet (Reply 28):
Don't get me wrong. I am not a US hater as accused. I lived there. I know it well. Allow someone to disagree or criticize without accusing them of hatred

Then you have a strong way of showin it. By using the word 'rant' and a lot of generalizations about not just US economic problems but complete collapse, your criticism went a little beyond the constructive phase.

Now, back on subject. This is completely cyclical. IIRR, a few years ago Boeing complained that the weak EURO was hurting their sales. Payback is a bitch.
 
katekebo
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RE: Airbus: Weak Dollar Hurting Costs

Sat May 06, 2006 1:20 am

Going back to the original subject....

I think Airbus has realized that the "golden years" are over and there is some tubulence ahead. Their financial results for the coming 2-3 years are probably not going to look as rosy as they used to be due to:
- slow sales / delays in the A380
- development costs of A350
- loss of market share in the widebody segment
- the cost of BAE share buyout

So now they are starting to "prepare the audiance" by complaining about the weak dollar and strong euro to justify the reduction in financial results. It's always easier to blame "external factors" which are out the company's control for dissapointing results, instead of acknowledging internal issues such as uncompetitive product line-up, too expensive manufacturing costs, etc.

Please do not flame me as an "Airbus basher" - this is something that all companies do when they realize that there is trouble ahead.
 
deltadc9
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RE: Airbus: Weak Dollar Hurting Costs

Sat May 06, 2006 2:24 am

Quoting Lightsaber (Reply 30):
I honestly think we'll see both the 767 and 330 as US tankers.

I don't think we disagree, my point was that there was no overriding issue that makes one plane significantly better than the other for this use, so the decision might go to Boeing by default because of political and other non technical reasons. I think we will need a clear reason to use Airbus for the Military over Boeing or Lockmart.

If Airbus made a plane that Boeing could not come close to matching, Airbus getting the deal would not be a surprise and would be in our best interest. Maybe punishing Boeing is in our best interest? Maybe splitting the order is best for whatever reasons?

Whatever happens, there are a lot of interests involved, and just a few have to do with actually refueling planes. This is true.

I do not believe that this is a case of vastly superior foreign tecnology that we would be foolish not to take advantage of. This is why I think the bickering is silly.
Dont take life too seriously because you will never get out of it alive - Bugs Bunny
 
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lightsaber
Crew
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RE: Airbus: Weak Dollar Hurting Costs

Sat May 06, 2006 2:43 am

Quoting Zkpilot (Reply 31):
he Yuan (Chinese currency) is artificially kept low by the Chinese government (for the purposes of making Chinese exports more competitive). If the Yuan was floated, it would immediatly climb about 20% (if not more) and the US$ would fall about 5-10%.

I alluded to this in post 26 but you did a much better job of detailing the imbalance and the impact. Thank you. I happen to agree with you.

Oh, I would debate a little on the percentage changes... but that is best done on a nice patio, at sunset, a fesh bottle of red wine, and the biggest other concern being who has to get up to restock the snacks.  Wink

Quoting Zkpilot (Reply 31):
In the US however prices for gas would go up about 5-10% and US consumers might finally get out of their gas guzzling SUVs, trucks, large cars, and might finally start driving normal sized cars like the rest of the world, and improve their rate of using public transport (something which my fellow Aucklanders in New Zealand need to do also...rail use is up 40% this year tho).

I wish... I really do that what you suggest could fall into place. We're trying to get my current location to sponsor a shuttle bus between a city parking lot and our work location to cut our driving. I also wish they would finally build the West terminal at LAX with its planned rail connections and that beautiful 200 slot bus terminal a la Frankfurt/HND/Berlin's new airport (concept)/other's I've forgotten.

I hear a lot of my fellow American's complain about gas prices and they are absolutely livid when I respond "how have you cut your consumption to teach the Oil companies a lesson."  Wink At least the two biggest SUV fanatics at work have bought down to economy cars with sensible 4 cylinders. I can't say what we'll be paying for gas in a year, but I know it will go up. With rising demand in India, the eventual correction with the yuan/Renminbi (when does the name officially change?) will force oil up another 25% to 33% in my opinoin. (Price in dollars at the US pump including my estimation for the weakening dollar.) Yes, $3.50 to $4.00 a gallon is my long term gas price estimate. Airlines had better re-equip for that environment!  wideeyed 

Postive note: My girlfriend always takes an express bus. Ridership on the 448 line (South bay to downtown Los Angeles) is up 100% year on year according to her count. 3 busses a day have gone from ~26 riders/bus to ~67...(Yes, people standing on *every* bus. IIRC the bus limit is 80 or 85.) She has a good memory and can count the people on the bus in less time than it takes to look around. In fact, the route is getting a new bus in a few weeks.  bigthumbsup  So American's are *finally* starting to adapt.

Lightsaber
"They did not know it was impossible, so they did it!" - Mark Twain
 
BoomBoom
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RE: Airbus: Weak Dollar Hurting Costs

Sat May 06, 2006 10:47 am

Quoting MrComet (Reply 28):
Don't get me wrong. I am not a US hater as accused. I lived there. I know it well. Allow someone to disagree or criticize without accusing them of hatred. Secondly, I would never offer Bosnia-Herzegovina as a model of efficiency or order so I won't agree to the hypocrite label.

I never accused you of being a a US hater.

I never called you a hypocrite.
Our eyes are open, our eyes are open--wide, wide, wide...
 
art
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RE: Airbus: Weak Dollar Hurting Costs

Sat May 06, 2006 11:31 am

Quoting Stitch (Reply 25):
If it does, China's screwed because we soak up so much of their output.

Regarding US-China trade and the dollar dropping in value, that would be the same as China revaluing the yuan. Which is what the US wants China to do.