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OM in the News: Airbus Lands in Alabama

September 21, 2015
The 1st A321 being inspected in the new plant in Mobile

The 1st A321 being inspected in the new plant in Mobile

Mardi Gras came early this year to Mobile, Ala., writes The New York Times (Sept. 20, 2015).  Following a jazz band, a float bearing waving dignitaries and sequined musicians, was a column of flatbed trucks, laden with sections of fuselage, wings and tail components of an A321 jet that had just made the 3-week Atlantic crossing from an Airbus factory in Germany. They were on their way to a new Airbus assembly plant — its first civilian factory in the U.S. “I think Santa Claus has been here, and he’s left us an airplane,” said Mobile’s mayor.

The $600 million plant, on 116 acres, is the culmination of a courtship ritual, one of many playing out across the country as communities vie for attention and investment from foreign companies. Like many states and cities, Alabama and Mobile sweetened the deal for Airbus with generous tax breaks and other financial incentives.  For Mobile, a city of 200,000, the prospect of 4,000 jobs with Airbus and its suppliers proved especially attractive. Unemployment there hovers at 8%, well above the national average.

Airbus’s foray into the U.S. forms part of a longer-term strategy. The company still lags far behind its rival, Boeing, in the U.S. market. As Japanese automakers did a generation ago, Airbus hopes that by producing aircraft that are “made in America,” it will be able to weaken Boeing’s advantage.

Airbus had eyed Mobile for years. The city’s deepwater port could accommodate ships carrying large structural parts from Europe. Freight trains run nearby, and the site, which is equipped with two long runways, is already home to small aviation maintenance companies and parts suppliers. Locating in Mobile would create a natural hedge against exchange-rate swings between the euro and the dollar and reduce some of the cost of transporting the $16.5 billion in components that Airbus buys from American aerospace suppliers each year. Labor costs were also substantially lower compared with Europe, and Alabama has a right-to-work law, which prevents unions from requiring workers to pay union dues.

Classroom discussion questions:

  1. Why Mobile?
  2. What are the disadvantages of opening a plant outside of Europe?
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