July 1, 2012 by ryanj598
Airbus has made a preliminary decision to open it’s first manufacturing facility on U.S. soil. Though not yet approved by the company’s governing body, the board of the European Aeronautic Defense & Space, they plan to build a plant in Mobile, Alabama that focus’s on the production of single-aisle airplanes. This is due to the United States being the world’s largest market for this type of plan and that the current U.S. fleet is aging significantly. So signs point to an uptick in demand in the near future. This would be Airbus’s first attempt to build on the home-soil of it’s main competitor Boeing, and there proves to be many pro’s and con’s to this strategic decision. Outside of the market demand, the cost of production, labor unions, labor flexibility, and benefits in euro-dollar exchange rates all played a role in the feasibility analysis of this decision. Likewise, Airbus believes having some of there planes “made in America” will help boost sales with the U.S. airlines.
My main point of interest, when this decision was being made, was how the variables/potential outcomes were ranked. For interest, did they put labor market relations as the top area of concern of was it the potential to corner a significant portion of the single-aisle plane market. Similarly, were they able to predict the relationship between multiple outcomes. For instance the article points out that if another recession was to hit a company based in Europe would have an easier time laying off thousands of workers in the U.S. than in it’s home soil. However, the publicity that Airbus would face with laying off that many workers in the U.S. would significantly hinder any further attempts to advance in the U.S. market. With the dominance of labor unions in Europe, I would have considered the company’s image in the eyes of the labor unions as the most important factor in potentially expanding into the U.S. With a large percentage of Airbus’s workforce being in Europe, I would think the drive to us cheaper non-union labor in America’s South would potentially reflect negatively on the company as a whole in regards to any future labor contract negotiations, relations, etc.
Will this decision prove to be a long-term windfall or gamble for the European Aerospace giant? How would you rank the various factors mentioned in the article in order of priority/importance?