Boeing plans to lay off “several hundred” employees at their satellite plant in El Segundo, California, blaming the closure of the U.S. Export-Import (Ex-Im) Bank for the need to cut back on employees. While the Ex-Im Bank makes for a convenient scapegoat, it’s absurd to expect a taxpayer-backed institution to fund international transactions that the world’s largest aerospace company doesn’t deem important enough to fund themselves.
The Ex-Im Bank has long been institutionalized crony capitalism, using taxpayer funds to help finance transactions for overseas businesses and foreign governments to buy American products. Originally intended for small businesses who might struggle to get private financing on their own, in the past decade the Bank has transitioned into a slush fund for huge corporations like Boeing to get government subsidies. Plagued with corruption and mismanagement—and having strayed far from its original mission—Congress let the Bank’s charter expire on June 30.
Boeing fought hard and spent more than $69 million since 2012 lobbying for the Bank’s reauthorization. And why wouldn’t they? In 2012, Boeing alone received 83 percent of all of Ex-Im’s loan guarantees, a trend that’s continued in recent years.
A Boeing spokesperson told the Los Angeles Times in late August that employee layoffs were needed at their satellite division after the global satellite operator ABS from Bermuda failed to get loan guarantees from Ex-Im for a satellite transaction due to the Bank’s expiration. However, Boeing’s financial arm, Boeing Capital, regularly finances aircraft sales worth hundreds of millions, and Fitch Ratings has noted that they could expand their portfolio by billions with ease. The ABS deal, which Boeing originally told Reuters was in the amount of “hundreds of millions of dollars,” is only actually $85 million, around the same price as the cheapest commercial airplane that Boeing sells. Surely Boeing Capital could handle the financing.
Companies usually lay off employees when they are financially struggling, as a sign of last resort. However, Boeing is expected to report record sales numbers this year. They have a seven-year backlog of 5,800 commercial aircraft and are expected to receive $5.6 trillion in revenue from all their commercial aircraft over the next twenty years. Boeing is more than capable of financing the ABS satellite transaction and retaining their El Segundo employees, if they chose to.
Earlier this summer, Dennis Muilenberg, Boeing’s new CEO, told investors in reference to Boeing’s second-quarter earnings that “there are multiple commercial credit sources available today,” aside from the Ex-Im Bank. High-level Boeing officials time and again have assured customers that they were confident they would find alternative funding sources for their customers, should Ex-Im expire.
In fact, according to the Wall Street Journal, Boeing has admitted that they do have the ability to use Boeing Capital to save the ABS satellite deal, but they would just rather use their financing arm for airplane transactions. If this deal isn’t good enough for a thriving Boeing Capital to save, why should U.S. taxpayer be on the hook?
Indeed, Boeing spokesman Tim Neal told Reuters that the layoffs are “necessary to remain competitive for ongoing and future business.” Over the past decade alone, Boeing has made similar decisions and laid off 18,332 of their 35,000 California employees, all while the Ex-Im bank was fully operational. Corporations use cost-benefit analysis every day to determine how to make their business leaner and more competitive. Blaming the expiration of a government institution that distorted the free market in your favor for your decision to lay off workers despite your record sales numbers is absurd.
Boeing has every right to run their business as they wish – but they must now do so without taxpayer-backed loans and government sweetheart deals. To blame Ex-Im’s expiration for American workers losing their jobs is disingenuous.