According to a report in this morning's Financial Times Deutschland (German) and later confirmed by Flight, Airbus will fully assemble the successor to A320, currently dubbed the A30X, in Hamburg. This news comes as the German government and Airbus are working out final terms for for €3.3B in A350 launch aid.
Currently, A320 family production is primarily based in Hamburg and Tianjin, while part of the A320-200 is built in Toulouse then flown to Hamburg for finishing.
Let us, for a moment look beyond the obvious - and ongoing - debate about the merits/legality of launch aid, and try to examine this deal through a different, possibly overlooked lens. This long term deal addresses key questions about the future growth and expansion of Airbus. It's not surprising that Hamburg would be the final assembly site, but the deal largely closes the book on any debate about final assembly operations at Airbus for almost a generation to come with A30X not set for service entry until at least 2020.
If we examine this through a broader strategic lens, with the involvement of national stakeholders, Airbus has gained labor stability and industrial predictability, with a distinct political subtext attached.
Yet, perhaps it's an appropriate point of juxtaposition to the relationship between Boeing and its stakeholders, the IAM and SPEEA. We are just months away from the selection of a second 787 final assembly line as Boeing weighs its options as perceived stability vs. perceived instability.
One viewpoint says that setting up a second line in Everett would introduce additional instability because of the risk of future strikes and delivery disruption. On the flipside, a native and experienced workforce with extensive widebody assembly experience is an asset not to be discounted.
For a site outside of Everett, stability would be
found in removing the labor obstacle by setting up a second
line in a right to work state. On the other hand, Boeing's own recent
history has demonstrated the challenges, and high cost, of setting up a
greenfield site.Ultimately, for Boeing and Airbus, steadily growing the business means the predictability of future costs, made all the more predictable by stability. Decision-making on issues like the location of aircraft final assembly operations will be driven by this motivation.
Yet does the push-pull dynamic between Boeing and its unions, vis-a-vis the selection of final assembly, add to the long term stability and predictability of Boeing's business? If Boeing is facing a potential forward loss on 787, then ensuring predictable future costs is essential to the future of the company. The question then becomes, how does Boeing define stability?
If both the mangagement of Boeing, as well as its unions seek stability and predictability for the future, then perhaps both sides should take a page from its competitor's playbook.
on August 11, 2009 1:13 AM | Reply
Very good. In fact, excellent. This point of view would seem to indicate that Boeing is far more predisposed to the idea of cost - particularly labour, as you so rightly point out - and for obvious reasons.
In my opinion, it would be a mistake for it seek out production sites other than those in Washington without making some sort of peace with the unions. As far as I know, Boeing has had far more industrial action taken against it by unions in the past decade than in the preceding 50 years combined. Perhaps the company could devote some effort at resolving that.
on August 11, 2009 3:22 AM | Reply
From both perspectives, what is the cost of bad relations? The unions are winning the strikes but losing the wars as their numbers shrinking. Boeing lost a billion dollars over the last strike.
Boeing lost $700 million in the 2005 strike over less than a $90 million difference which the union got at the end of the strike anyways.
Now instead of working towards a longer term solution, Boeing is willing to spend an additional billion dollars (my estimate for building and tooling) to open a second line elsewhere.
Some business sense needs to be injected into the process.
Perhaps, instead of demanding a no strike clause, Boeing should ask, of the union and themselves, what would it take to sign a 30 year contract? Perhaps they more in common than we think.
on August 12, 2009 7:55 AM | Reply
Heureka, yet again unions and gouvernments invite the industry to fool them. AIRBUS - as any other company in the world - would do anything to get that 3,3b€ launch aid NOW. Well, this time they comitted to completely final-assemble in Hamburg a so-called A320 successor (which at the same time this very company AND their competitor call decades away from launch due to market situation and lacking engine technology - which both are not under their control).
Who does seriously think, French gouvernment will let the AIRBUS cash cow move away completely to Germany when the time comes, or that AIRBUS transfers significant Single-Aisle know-how to Chinese brachnes without extending the use of these facilities in the future?
Seriously, when the time has come and such a successor might be really launched, the gamble will surely start from scratch.
We all know the excuses they will draw then: Changed economic situation, economically adverse balance of Euros and Dollars, growing pressure from the Asian countries, loss of ten-thousands of jobs in Europe or simply the unwillingness of future ECs to commit to the guarantees which were made by their successors - and these are only the excuses we already know. Normally they're quite creative in making up new ones.
Clever move from AIRBUS to get the tax payer's money now, but a very transparent one still. Even more sad that unions and gouvernments fall for the trick - again.
on August 12, 2009 3:18 PM | Reply
The whole thing with the A30X isn't news. It's been out there since Airbus made the idiotic decision to build A380 in Toulouse. The sensible location would have been Hamburg... a PORT city rather than the LANDLOCKED city of Toulouse. Just look at the utter waste and insensiblity of the infrastructure that had to be created just to drag the various bits and bobs of the A380 across Southern France. A sensible decision would have put it in Hamburg, with ready access to the sea. Having the A320 replacement built in Hamburg was all part and parcel of the A380 outcome, and the designation of Hamburg as the "Centre of Excellence" for narrow body aircraft in Airbus.