General aviation manufacturers, particularly those involved in agricultural aviation, are re-evaluating their production plans for 2015 in light of the battle brewing over reauthorization of the U.S. Export-Import (Ex-Im) Bank, industry leaders say.
Ex-Im’s current authorization is due to expire at the end of September, and top House Republicans are casting doubt over whether they will take up the issue before then. In addition, major airlines and labor are urging, at a minimum, changes to the bank’s operations to prevent a competitive imbalance with foreign airlines.
Hartzell Propeller President Joe Brown recently told House lawmakers that three or four of his top 10 customers have called him, warning him to be cautious in his planning for 2015. The manufacturers indicated that a number of their sales were dependent on Ex-Im Bank backing, particularly in the agricultural aircraft market, Brown says. Air Tractor, for instance, recently reported that six of seven aircraft on its production line were to be Ex-Im Bank backed.
"They called to tell me that the forecast after 2014, the month-by-month unit forecast for their build rate is in question, and they wanted me to understand that my assumption for 2015 may not be founded," Brown told the House aviation subcommittee.
As a result, he says, his company is taking a "totally defensive position" on hiring for 2015 and cutting its capital budget plan in half for the year.
"A few months ago, I would have never imagined this would have been an issue in my business," Brown said. "The idea that it may not be reauthorized is new to me."
Aerospace Industries Association CEO Marion Blakey agrees. "None of us imagined we would find ideological rhetoric somehow coloring what should be very straightforward support for American competitiveness," she told House lawmakers. "It is taking a while for the business community to realize that this is in jeopardy."
She stresses that the benefits of Ex-Im Bank financing are "enormous," and added that the financing is important to fill the gap where capital markets don’t finance or finance enough. She also notes that it levels a playing field with international manufacturers, which she argues get "real subsidies" from their own countries.
U.S. general aviation manufacturers have "dramatically" increased their use of Ex-Im facilities in the past several years, Bunce says, calling access to Ex-Im support an important means to jump-start the still-sluggish general aviation market.
General Aviation Manufacturers Association President and CEO Pete Bunce also stressed the importance of the bank to the general aviation community, noting that it has taken an increased role in financing as the number of exports has jumped to 50% of U.S. GA shipments. Bunce notes that 10 years ago, only a handful of airplanes were financed through Ex-Im. That has changed, and the bank now has a goal to provide $2 billion in backing for GA exports by the end of the year.
"There are producers of aircraft and products throughout the world, and many of these countries have Export Credit Agencies," Bunce testified. "U.S. manufacturers cannot afford to have the Ex-Im leave the playing field. There is too much at stake for U.S. jobs and the economy."