Boeing and the Wages of Subsidy

Corporatism Watch: Is Boeing too compromised by its dependence on Obama administration subsidies to fight a ruling by the administration’s National Labor Relations Board telling it where to build the 787? …  Even if you heroically assume the NLRB is independent of political influence, that doesn’t mean the administration couldn’t retaliate elsewhere if Boeing fights the NLRB too vigorously. Boeing has recently gotten $15 billion in loan guarantees from the Export-Import Bank. Is the Ex-Im Bank insulated from political influence too? The Washington Examiner rightly points out that it was just assumed–not even a scandal, no surprise at all–that banks receiving TARP funds were inhibited when it came to contesting their treatment as creditors in the administration’s auto bailout. 

Might the Obamaites mess with a troublemaking manufacturer’s loans? The phrase “yes, we can” acquires new meaning. …

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  • The Drill SGT

    Boeing has recently gotten $15 billion in loan guarantees from the Export-Import Bank.

    Though I would not doubt that the Obama folks could try to play hardball, I don’t think you are valuing things correctly.

    To put it in perspective, the last IAM Boeing strike lasted 58 days and cost Boeing $1.8 billion.

    $15 billion in loan guarantees is not 15 billion. looking things up, let’s go with back of the envelope analysis. I don’t know what Boeing pays for production loans, but they have contracts in hand and are looking to bridge between contract with an airline and the delivery/payment. so the rate has to be good. I expect roughly prime rate. Today 3.25%. now say they have to float that money for 2 years. Interest on 15 billion would amount to $100 million. Now a loan guarantee just amounts to a promise to insure the loan, so instead of paying say 3.25%, you pay 3%. thus saving yourself $10 million in interest.

    Now compare $10 million in loan advantage versus $1.8 billion in out of pocket costs if you have a strike.


    There are lots of ways that Obama can make life hard on Boeing, but most will be fairly public and there will be a cost to Obama as well.

    • jamesb_bkk

      Mr. Kaus is close to target as usual. Exim loan guarantees would cover default due to political risks affecting a foreign buyer, not the seller’s own credit, and likely would be required for the buyer to raise commercial debt for purchase, allowing a sale. These types of credit facilities are essential for most all large exporting industrial manufacturers in the US (and Europe). Exim guarantees are therefore much more valuable to a large airplane manufacturer than a few basis points’ coverage. This is not to even mention the DOD and aerospace contracts. Exim apolitical? Also not sure.

  • alanr

    Geez, I hope someone tells Airbus to find a way to increase their labor costs to keep pace, otherwise Boeing will not need a new facility in South Carolina, Washington or anywhere else as far as commercial airliners go. And if Embrarer or Bombardier decide to enter the full size market it will take more than a little stimulus to save Boeing.

    Does anyone here know how to play this game?

  • jfr13

    Don’t forget their recent win of the tanker contract. A win that was very political. And worth 30 Billion.

  • hitnrun

    This would be an interesting question even in an America where the DoHHS *wasn’t* threatening retaliation against private companies that tell the truth to their workers about Obamacare.

  • stephenkaus

    Tell me again how the banks receiving TARP money and the other beneficiaries of the government rescue felt beholden to the government or the people of the Country in any respect. I missed it the first time. Pigs.

    • Mickey Kaus

      My impression is that the banks receiving TARP funds were strongarmed into accepting the Chrysler terms the government wanted.
      You can argue it was in the public interest that they accept those terms, and they should be more public-spirited, but if they behaved differently because the Obama administration had TARP leverage, that’s troubling. Next time the government will be strongarming them about something you might not like.