Boeing is expected to report record sales numbers this year, has a seven-year backlog of 5,800 commercial aircraft orders and is expected to receive $5.6 trillion in revenue from its commercial aircraft over the next two decades. Yet, the world’s largest maker of commercial aircraft has decided to blame the closure of the U.S. Export Import (Ex-Im) Bank for its decision to lay off “several hundred” employees at its satellite division in El Segundo, Calif.
According to the Los Angeles Times, Boeing said the cuts were needed after the Bermuda-based global satellite operator ABS couldn’t get financing from Ex-Im. This decision stands in stark contrast to multiple public commitments from senior Boeing officials that it would be able to “cover” or self-finance its own transactions once the bank expired — but it would just rather not have to do that.
As recently as this summer, Boeing’s new CEO Dennis Muilenberg assured investors during a conference call on Boeing’s second-quarter earnings that, should Ex-Im expire, “There are multiple commercial credit sources available today.”
In 2013, when the bank was originally scheduled to expire, the managing director of Boeing’s financing arm, Kostya Zolotusky, also said he was confident the company could find alternative funding sources for customers, according to The Wall Street Journal.
And earlier this summer, Boeing spokesman Tim Neale told The Wall Street Journal, “We do provide some customer financing, and if there’s a short-term shutdown of Ex-Im, we will work with customers who are scheduled for deliveries to ensure they get the financing they need, even if we have to provide it ourselves.”
When Boeing first told Reuters about the lack of financing, it claimed the amount was “hundreds of millions of dollars.” It has since had to publicly walk back from the number and acknowledge that the amount is $85 million — as much as the cheapest commercial plane that Boeing offers.
Financing a transaction of that amount should be easy for Boeing Capital, a subsidiary of Boeing that provides asset-based leasing and lending services.
After all, Boeing Capital routinely finances aircraft transactions for hundreds of millions of dollars and, according to Fitch Ratings, could expand its portfolio by billions without any concern. But according to recent reports, Boeing admitted that while it has the ability to tap its own commercial-financing organizations to save the satellite deals, it likely won’t. It seems that rather than save the transaction and the jobs in El Segundo, Boeing prefers to make a political statement in Washington, D.C., and blame the loss of government subsidies.
If these transactions aren’t worth saving by Boeing itself, taxpayers should not be on the hook for providing these loans.
The threat of layoffs may be a ploy to scare members of Congress because Boeing may not even have to layoff employees. Boeing spokesman Tim Neale has pointed out that some employees might not be let go entirely, and would instead find work in other areas of Boeing. He has also stated that the layoffs are “necessary to remain competitive for ongoing and future business,” according to Reuters. It’s also worth noting that Boeing laying off workers in California is nothing new — over the past decade alone, they’ve let go 18,332 of their 35,000 California employees.
So which is it? Boeing can finance these transactions but, based on a cost-benefit analysis, made the business decision that this satellite deal isn’t worth financing itself in order to maintain jobs in California? A leaner business model is “necessary to remain competitive?” Or maybe Boeing just doesn’t want to cut into the average $16 million per year it spends to lobby members of Congress for these sweetheart deals.
Boeing can’t decide what its story is, other than that it wants its taxpayer subsidies back. And, the fact is that most crony capitalist companies want more government giveaways to pad their bottom line, which is not in the interest of taxpayers or a thriving free market.
Hard-working taxpayers and those elected to represent us must stay strong. Keep this institution of corporate welfare closed for good.
David Williams is president of the Taxpayers Protection Alliance. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
