Boeing: China no Threat to Airplane Manufacturers

Sep 25, 2015

China’s aviation industry is at least a generation away from competing with U.S. and European manufacturers, Boeing’s chairman said Thursday

Chinese manufacturers are decades away from competing globally in the airplane manufacturing industry, Boeing Co.Chairman Jim McNerney said Thursday.

China will remain a large buyer of American-made airplanes and a supplier of parts, Mr. McNerney said at an aviation industry event in New York. Boeing announced on Wednesday that Chinese airlines had agreed to buy 300 new jets from the company, and that it would open a facility to perform finishing work on 737 jets built in the U.S. and flown to China.

“We are going to invest more in innovation going forward,” he said. “We lose if don’t maintain that innovation edge.”

Mr. McNerney, who stepped down as Boeing’s chief executive in June, also said he expects Congress to reauthorize the U.S. Export-Import Bank. The bank’s mandate expired on June 30, and it’s unclear whether supporters have enough votes to revive the institution, which provides loans and guarantees to help overseas customers of U.S. companies finance their purchases. Industrial and aviation companies, including Boeing, General Electric Co.and Caterpillar Inc.,have been among the bank’s biggest beneficiaries.

Companies argue that shutting the bank strengthens overseas competitors that continue to have access to government-backed financing in their own countries. Last month, Boeing said that the closure had cost it an $85 million satellite contract with a Bermuda-based telecommunications firm, which said it would look elsewhere for financing. GE said Thursday that it would move 1,000 new energy jobs to the U.K. after winning export financing from the Ex-Im Bank’s UK counterpart.

“Customers require guarantees. Europe has them, and we don’t,” Mr. McNerney said. He added that without the bank, Boeing is at a disadvantage on roughly 10% of the business for which it competes. “You have to evaluate some parts of your supply chain being able to access financing (if it) isn’t available in your country.”

Mr. McNerney said he was “frustrated” that members of Congress were pressuring House Speaker John Boehner to prevent the reauthorization from coming to a vote.

“It’s a triumph of the inside game over what’s good for the country,” Mr. McNerney said. “It really is a sign of the dysfunction that exists in Washington.”

Mr. McNerney said that Boeing is pursuing innovation in the types of materials used to build airplanes and jet engines, as well as in keeping manufacturing costs down.

“You look inside a jet engine today, and you’d be shocked at the amount of non-metallic material,” he said.

Longer-term, the next wave of innovation in the aviation industry will occur when manufacturers start building vehicles that “blend atmospheric and space travel together,” Mr. McNerney said, a milestone that is technologically within reach today.

“When that day comes, and you’ll be blending supersonic and space travel, then you’ll see some very different designs,” he said. He also praised entrepreneur Elon Musk, whose Space Exploration Technologies Corp. has added competition to the space travel and satellite industry, though Mr. McNerney added that Mr. Musk has not achieved enough scale to become a serious competitor to Boeing.

 Source: wsj.com