political backlash

Airbus plan to cut jobs brings calls for setting conditions on aid

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You can mothball a plane but workers fight back. Source: Reuters

Airbus provoked an immediate political backlash when it announced this week it will cut some 3,700 jobs as it scales back production of its A380 superjumbo jet airliner and the troubled A400M military transport. In Germany, which will bear the brunt of the cuts, politicians of all stripes called for linking government subsidies for the aircraft maker to maintaining jobs.

The cuts won’t take place until 2020 and Airbus said it hopes to find other jobs in the company for those affected. Order books are full for other aircraft and the company is stepping up production. What counts for the politicians, however, is preserving jobs in existing locations.

“The company has a special responsibility,” Christian Hirte, a Christian Democratic leader in parliament, said, referring to the government support. “That goes for the concerns of workers in individual locations.”

Airbus is currently in talks to extend some government loans, and the politicians want to put conditions on that. “It is in my view legitimate to tie the granting of public funds for Airbus to conditions,” said Bernd Westphal, economic spokesman for the Social Democrats in parliament. Politicians have an obligation to prevent “inequitable hardships” and protect individual locations, he said.

“The company has a special responsibility.”

Christian Hirte, Christian Democratic parliamentary leader

The role of government subsidies for Airbus has been controversial virtually since it was founded as a cross-national company with significant government ownership. The other major global aircraft maker, Boeing, is permanently challenging the Airbus support in litigation at the World Trade Organization.

But Boeing itself is the beneficiary of massive direct and indirect government subsidies. It is by far the biggest recipient of loans and loan guarantees from the US Export-Import Bank, with more than $60 billion. It also gets nearly $20 billion in aid from state and local governments, according to subsidy tracker Good Jobs First. In addition, Boeing is the second-biggest defense contractor and rivals charge that these awards are inflated as a form of subsidy.

Boeing even ran afoul of Washington State on the same issue of cutting jobs after receiving huge subsidies from the state government. In 2013, the state gave Boeing an $8.7 billion tax break to maintain and grow its workforce. The planemaker had long since moved its headquarters from Seattle to Chicago to cash in on tax incentives there. Subsequent to the 2013 agreement on taxes, Boeing has laid off nearly 13,000 workers in Washington – 15 percent of its workforce in the state. This led to a bipartisan backlash and last year lawmakers prepared legislation to claw back some of the aid if the trend continued.

Airbus blamed the scale backs in production on weak demand for the A380 and production delays in the A400M transport. The cuts will hit workers in Bremen and Augsburg particularly hard. The Hamburg facility also builds the A320 and A350 series in high demand, so workers there can easily shift. For the others, keeping their jobs would require relocation.

Airbus said it would discuss their concerns with workers’ representatives and has plenty of time to do so since the cuts would only take effect in 2020. The company said that as it has in the past it will be “responsible” in its decision-making.

A direct link between government assistance and political conditions like maintaining jobs is against WTO rules, so it’s unclear what lawmakers or the government can actually do about it. The economics ministry is currently negotiating an extension of so-called “development loans,” to help finance new product development. The ministry declined to comment. But sources in Berlin suggested that, whatever the letter of the law, it would be naïve to expect the question of job cuts could be kept separate from the grant of public money.

Thomas Sigmund is Berlin bureau chief for Handelsblatt and Klaus Stratmann is a reporter in the capital. Darrell Delamaide is a writer and editor for Handelsblatt Global in Washington, DC. To contact the authors: sigmund@handelsblatt.com, stratmann@handelsblatt.com, and d.delamaide@extern.handelsblatt.com.

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