Boeing’s Southern California layoffs could affect subcontractors
Boeing Co.’s planned layoffs in Southern California, announced this week, have revived concerns that the aerospace industry may suffer if Congress doesn’t renew its support for the U.S. Export-Import Bank.
The bank’s charter from Congress expired at the end of July after House Republican leaders prevented a vote to extend it. The federal agency helps U.S. companies sell their goods overseas by providing loans and other assistance.
Conservative critics contended that the Export-Import Bank provided corporate welfare to large corporations like Boeing, the biggest beneficiary of the bank’s loans and other aid, as well as the nation’s largest single exporter.
The expiration of the Export-Import Bank charter was one of the key reasons given by Boeing on Tuesday to explain the layoffs, expected to number in the hundreds. Aerospace and satellite industry players were quick to lament what they said could be a ripple effect.
Some Boeing subcontractors said reauthorizing funds for the bank is crucial to keeping U.S. businesses competitive in the global marketplace, where international rivals sometimes rely on similar support from their own governments.
The Export-Import Bank still has supporters in Congress, who want to reinstate its charter. But the bank will be unable to grant financing at least through the end of the summer while the House is on a lengthy recess.
“The reinstatement of the Ex-Im bank is absolutely crucial to the health of the aerospace industry, especially in California,” said Howard Kimberley, chief executive at British firm Shimtech Industries, which owns Lamsco West Inc., a Santa Clarita supplier of shims for Boeing. “Boeing is an absolutely crucial part of our business.”
Kimberley said the satellite division layoffs would not affect his firm’s work with Boeing, which is on the commercial aircraft side, but he said the two companies are closely tied.
“If Boeing’s business starts to suffer because they’re selling fewer airplanes, inevitably, we will suffer with them,” he said.
Frank Slazer, vice president of space systems for the Aerospace Industries Assn., said the expiration of the Export-Import Bank’s charter comes at a time when the U.S. military has cut back on buying spacecraft.
“It’s increasingly important for these companies to successfully export,” Slazer said. “Export controls were important in that respect, but financing is another key issue. It’s a little too soon to see extensive impacts yet, but it will grow over time.”
But Marco Caceres, senior space analyst at market research firm Teal Group Corp., said the canceled order is unusual because most satellite orders come from well-capitalized companies that don’t necessarily rely on government financing help.
“Do I think this is a sign of things to come in the market?” he said. “I would say not.”
Boeing said Tuesday that a Bermuda-based customer canceled an order for an expensive satellite when it could not get funding through the Export-Import Bank.
The bank provided $20.5 billion in loans and other assistance last year to finance $27.5 billion worth of U.S. exports. Taxpayers provide no money to the bank, which is funded by interest and fees, although the government is on the hook for any losses. The bank sent $675 million in profit to the U.S. Treasury last year.
Boeing spokeswoman Linda Taira said the Chicago aerospace giant and global satellite operator ABS are discussing other ways to fund the satellite purchase.
The layoffs in Boeing’s El Segundo satellite division are expected to happen by year-end.
It’s too soon to tell how Southern California suppliers will be affected by the layoffs. But those in the aerospace and satellite industry say other California jobs could be at risk.
Boeing and its supporters have said that last year the company channeled $48 billion in business to 15,600 U.S. suppliers, including about 3,300 in California.
And it is these subcontractors and small-business suppliers that could be affected the most, said David Blanco, president of Performance Ascent Inc., which works with suppliers in the aerospace defense industry. He is also a leader on the Los Angeles County Economic Development Corp.’s SoCal Jobs Defense Council, a network of more than 300 company stakeholders focused on growing and maintaining the aerospace industry.
“If you lose a major contract, and you’re a major company, your suppliers are going to lose out as well,” Blanco said. “We don’t really know what the direct implication is, in terms of jobs. But we know that’s definitely there.”