Feb. 17--President Obama, speaking at Boeing's Everett plant Friday, plans to announce a series of measures to promote U.S. exports, according to an outline of his remarks provided by the White House.
For Boeing, the most significant action may be an expansion of the authority of the federal Export-Import Bank that could help protect sales of the 737 MAX.
Obama is set to announce that he'll extend Ex-Im Bank financing and loan guarantees to cover not only international but also domestic sales of U.S. products, if foreign governments offer such financing for competing products.
Until now, Ex-Im has stayed out of domestic sales. Providing federal financing to, for example, a U.S. airline interested in buying Boeing's 737 MAX, would be a break with long-standing practice.
The shift may be directed to support the MAX against competition from Bombardier of Canada's new CSeries jet.
The President "will not allow U.S. companies and workers to lose out on valuable business due to unfair export financing -- and will use the Administration's full powers to ensure that they are competing on an even footing," according to the advance summary of his remarks.
In addition to the extension of Ex-Im authority to domestic sales, the President's prepared remarks include a call for Congress to reauthorize the Bank before it hits its $100 billion lending ceiling, which could happen as early as next month.
He'll also lay out a pilot program for the Ex-Im Bank to help small business exporters with 6-12 month loans of up to $500,000.
The prepared remarks state that this program will give Boeing suppliers access to more than $700 million in short-term credit this year.
The underlying theme is creating manufacturing jobs. The Boeing plant is the perfect location to promote the Ex-Im Bank as a powerful agency to push that election-year agenda.
The Canadian government is set to provide loan guarantees to Bombardier to help boost CSeries sales, which have so far been slow.
U.S. diplomatic cables released last year by Wikileaks revealed that the Obama Administration privately told the Canadian government in 2009 that such financing would put Boeing at an unfair disadvantage under the current rules. U.S. Treasury officials threatened to match any Canadian government financial backing in a head-to-head sales battle between Boeing and Bombardier.
Last May, Fred Hochberg, chairman of the Ex-Im Bank, in an interview with The Seattle Times, said that his agency was actively considering such a move and that if the Canadians proceeded, Boeing "can rely on our backing."
"It's a question of competing for jobs in Washington state or Quebec," Hochberg said then. "I have a clear preference where I want the jobs to be."
But Hochberg added afterward that to provide such backing to Boeing his agency would need approval from the U.S. Treasury.
With Obama's announcement in Everett, it appears that the U.S. has pulled the trigger and that Ex-Im will now have the authority to go ahead and provide financing and loan guarantees for domestic sales.
The federal financing will be available to any U.S. firm competing for either domestic or international sales against foreign companies who are deemed to have received "non-competitive official financing that fails to observe international disciplines."
Such financing can make the difference between a Boeing sale and no sale in the risky, often money-losing airline business.
Many airlines eager to buy Boeing jets simply don't have the cash and also can't afford or wouldn't qualify for a commercial bank loan.
But the Export-Import Bank can come in and offer the U.S. government's guarantee to back a commercial bank loan, shifting the risk from the bank to the government. If an airline defaults, the Ex-Im pays off the loan and pursues the airline for its money back.
Ex-Im backing instantly renders credit-worthy an airline that couldn't otherwise raise the money and enables it to go ahead and buy Boeing jets.
It's a system that has been pumping up international sales to record levels for the last three years. In 2011, the Bank provided $32 billion in financing for U.S. exports.
Air India bought its 787 Dreamliners with Ex-Im financing. President Obama will cite Ex-Im support for Boeing jet sales to Ethiopian Airlines and most recently to Lion Air of Indonesia.
Lion Air finalized a record order just this week of 230 Boeing 737s, including 201 of the upcoming MAX model. The deal was originally announced during a state visit by Obama to Indonesia last November.
"The Export-Import Bank played a critical role to support that deal," according to the summary of Obama's prepared remarks.
Although Airbus sales chief John Leahy complained bitterly about "political interference" in that sales campaign, the European government banks offer similar financing in overseas competitions.
Since the 1980s, there has been an informal agreement between the U.S. and the four home countries of Airbus in Europe: The U.S. government's Ex-Im Bank and the corresponding lending institutions in Britain, France, Germany and Spain don't provide loan guarantees to airlines in each other's home markets.
But while this creates parity between Boeing and Airbus in sales competitions, the balance is potentially upset if the Canadians offer loan support to either U.S. or European customers.
Obama's prepared remarks do not mention Canada. Instead, China is cited as a competitor that provides "unfair advantages."
While Chinese jets may possibly be a threat to Boeing eventually, that prospect is realistically at least a decade away.
In contrast, Bombardier is trying to sell to United and other U.S. airlines this year.
Still, the CSeries jet is considered less of a market threat to Boeing than it was before the MAX was launched. It will be hardball trade politics if the U.S. government steps in to weaken its sales further.
Dominic Gates: 206-464-2963 or [email protected]
Copyright 2012 - The Seattle Times
