Saudis Will Buy 50 U.S. Airliners : Commerce: $6-billion deal helps Douglas and other California firms, and may save 100,000 jobs nationwide. White House trumpets pact, for which it lobbied hard.
In an unusual step, President Clinton announced in a White House ceremony Wednesday that Saudi Arabia will purchase at least 50 new airliners from U.S. manufacturers--an order worth about $6 billion.
The decision to trumpet the agreement from the White House marked an uncommon level of government participation in a commercial transaction that was designed to underscore the Administration’s growing involvement in promoting U.S. exports.
The Saudi order is extremely important to Seattle-based Boeing Co. and to the McDonnell Douglas Corp. of St. Louis, which will share production of the planes. It also provides a major boost for McDonnell’s struggling Douglas Aircraft division in Long Beach and for dozens of California-based aircraft parts makers that supply components to Douglas and Boeing.
Although the order is not likely to prompt a new wave of hiring by the firms, it is expected to help stabilize employment--welcome news for the companies, which have had to resort to steady layoffs because of defense cuts. Nationwide, the purchase could keep as many as 100,000 workers employed over the next several years, Administration officials said.
The precise division of work between the two companies and the exact types of planes the Saudis will buy will not be announced until after a final round of negotiations between the companies and Saudi officials. Those negotiations are expected to begin next month in Saudi Arabia.
That the Saudis intend to buy American planes--rather than the European-made Airbus--first became clear through official confirmations last summer. But the final deal was made only after intensive lobbying by the President and by other senior officials who were competing for the business against senior government officials from Britain, France and Germany.
The degree of government involvement in the deal was underscored by Clinton’s announcement in the Roosevelt Room of the White House, where he was flanked by the Saudi ambassador, Cabinet members and top officials of Boeing and McDonnell Douglas.
As the President announced the deal, his glee was evident.
“What this demonstrates is that we’re serious about opening markets, we’re serious about competing effectively, we’re serious about working in conjunction with American business and industry to win those battles,” Clinton said.
The announcement followed a meeting in December in which officials of U.S. aerospace firms and defense contractors agreed to give the Saudis more time to pay for American arms that they had ordered in recent years. The United States long has been Saudi Arabia’s chief source of arms and the main guarantor of its security. Despite the kingdom’s reputation for vast wealth, however, it has had to make sharp cuts in its budget in recent years because of the decline in oil prices.
At the White House ceremony, Clinton hailed the Saudi announcement as “a gold medal win for America’s businesses and workers” and said it validates his Administration’s intensified efforts to lobby on behalf of American businesses overseas.
Until the late 1980s, American officials generally avoided lobbying foreign governments directly on behalf of U.S. companies and downplayed commercial concerns in favor of American strategic interests. Changes in that attitude began in the George Bush Administration, but Clinton and his top aides have gone much further--directing U.S. embassies to work with the Commerce Department to enhance sales by American companies and intervening at high levels when U.S. firms have encountered strong foreign competition.
In the Saudi deal, Secretary of Commerce Ronald H. Brown, Secretary of State Warren Christopher and Secretary of Transportation Federico Pena each traveled to Riyadh to urge Saudi officials to buy American. Clinton spoke by telephone with King Fahd last fall on the issue and the effort consumed the attention of a host of senior officials, from White House Chief of Staff Thomas (Mack) McLarty on down.
Foreign governments were no less ardent, with French President Francois Mitterrand and British Prime Minister John Major traveling to Saudi Arabia to press the case on behalf of Airbus Industrie.
As part of the incentive to buy the American planes, the Administration arranged for the government’s Export-Import Bank to guarantee the loans the Saudis will take out to pay for the purchases. The bank guarantees will lower the interest rate the Saudis will have to pay and would only cost taxpayers money if the Saudis defaulted--something considered very unlikely.
Clinton had been eager to secure the Saudi airline deal in part because it is a highly visible symbol of American exports--airplanes are one of the country’s leading exports--but also because the companies involved provide high-paying jobs in a host of politically important states.
In addition to the jobs in Southern California, Boeing is by far the largest single manufacturer in the state of Washington, which is another politically crucial area for Clinton. Various subcontractors for the airplanes have plants scattered across the country from Connecticut to Utah.
The news drew political cheers from Democrats in several of those states, including Sen. Barbara Boxer (D-Calif.), who called it “welcome news to help California’s economy to make the transition from a military to a civilian base.”
Times staff writer James F. Peltz in Los Angeles contributed to this story.
The Boost for California
Saudi Arabia’s plans to buy U.S.-built passenger jets for its national carrier, Saudia Airlines, will be a major boost to American airline manufacturers. Nationwide, the purchase could keep as many as 100,000 workers employed over the next several years. Administration officials said.
HIGHLIGHTS
The Order: Between 50 and 70 airplanes, valued at $6 billion.
Winners: Boeing and Douglas Aircraft division of McDonnell Douglas in Long Beach. The Saudis will decide next month which aircraft, and how many, to buy from each company. Douglas’ MD-11 and Boeing’s 747 wide bodies are among the planes likely to be bought.
Loser: Europe’s Airbus Industrie.
Local impact: Up to 11,000 jobs of all kinds at Douglas and thousands more at aircraft-part suppliers should be perserved. The new orders could also save Douglas itself. Local suppliers that could benefit are Northrop, Rohr and AlliedSignal.
GOOD NEWS FOR LONG BEACH’S DOUGLAS AIRCRAFT
The rise and fall of jobs at Doublas Aircraft: ‘93: 11,000 Sources: McDonnell Dougles, Times staff
Researched by ADAM S. BAUMAN / Los Angeles Times
