Beechcraft bailout

[Aargh]

I normally avoid political threads but the deal with Beech has me scorched, seething, and angry.

First of all, LA is courting them with federal dollars. It's based on stimulus funds for rebuilding after Katrina. On the surface, that sounds like a good idea, but ...

...That money is being used - not to create jobs - but rather to take them away from another area.

So now, after it's our tax dollars being used to remove jobs from our economic base, the State is being asked for money. That will mean we pay more money to try to save the jobs that the money we've already paid (sort of - it's debt) is being used to take those jobs away.

How insane has the combination of our economic system and our government become?

Different entities kept buying Beechcraft for too much money and now the debt service has Beech teetering on bankruptcy. The debt service has pretty much destroyed an otherwise very solid company.

In the normal economic model, Beech would go bankrupt, the people who relied on bad information and paid too much would lose their investment, Beech's market share would pass to competitors (mostly Cessna), Cessna would employ enough former Beech employees to fill the additional market share, and efficiency in the industry would be gained.

Throw some government money into the equation and inefficiencies are rewarded, bad investing strategies aren't punished, and the industry begins producing airplanes built by people with little or no experience building airplanes.

And we're paying for that.

[AMaizNShocks]

What makes me boil is that according to three different sources in LA, this deal with HBC was closed a couple of months ago. If this is true, all of this re-negotiating with the labor union was nothing but a ruse.

Something else that has been flying under the radar in the local media is the tremendous amount of work that Cessna is sending to Mexico.

Cessna is bailing out of Wichita too, but doing it in pieces so no one in the media takes notice. Within two years there won't be anything left.

InterMex, who leases all of the facilities’ to these American companies in Chihuahua, Mexico, is expanding tremendously. Cessna just opened another 83,000 square foot facility there with plans to add an additional 430,000 square feet.

[pogo]

Look at North Rock Road and LSI. LSI moved all of its mfg to guadalajara a couple of years ago and moved several hundred customer service jobs to Oregon because Wichita didn't have the "skill set" that was needed. Its not just the aircraft mfg that is leaving Wichita.

[InWuWeTrust]

lost opportunities:

white castle (long time ago)...fedex hub (1990)...pizza hut (1990s)...rent-a-center (1990s)...beech (2010)...cessna (2011?)

we had an opportunity a long time ago to diversify our economy away from aircraft and what have we done? -- built an aviation training center.

maybe this is what we need to get off our asses and recruit other industries, preferably service over manufacturing.

[AMaizNShocks]

I like how companies use terms like "skill set" to attempt to rationalize their decisions to move their companies.

One can train most people to do almost anything, so I don't buy into the argument that Wichita's work force lacked proper "Skill set".

The technical skills of the work force have nothing to do with it. It's all about profit margin. Labor forces in places like India, Mexico, and poorer States like LA are willing to work for much less.

Unless states like Kansas offer incentives to these companies to off set production cost, businesses will continue to leave.

Pay attention though; Obama will claim any jobs that move to another State as "New Jobs". There won't be any mention of the ones lost here.

[BenWSU]

I think the main reason companies relocate is due to the unions & their wage demands for employees.

[InWuWeTrust]

I think the main reason companies relocate is due to the unions & their wage demands for employees.

i agree. ford, gm, and chrysler lay off all the time (union), toyota, honda, nissan, and hyundai don't (non-union)... any coincidence? prolly not

a very good friend of mine retired from beech at 55 to move to north carolina to work for hondajet - he says that they have their $hit together, and are producing a product with good profit margins. he is making more $ there in a similar position than he was here.. the difference? he says that management is in tune with whats going on, and they don't have the red tape (aka unions) to deal with.

[AMaizNShocks]

I think the main reason companies relocate is due to the unions & their wage demands for employees.

a very good friend of mine retired from beech at 55 to move to north carolina to work for hondajet - he says that they have their $hit together, and are producing a product with good profit margins. he is making more $ there in a similar position than he was here.. the difference? he says that management is in tune with whats going on, and they don't have the red tape (aka unions) to deal with.

Good Point. In some cases labor unions have priced themselves out of the market. Embraer, a Brazilian jet manufactures business is booming. One reason is a cheap labor force and no unions to contend with. They also get assistance from the Government which helps them out tremendously.

[SB Shock]

I think the main reason companies relocate is due to the unions & their wage demands for employees.

a very good friend of mine retired from beech at 55 to move to north carolina to work for hondajet - he says that they have their $hit together, and are producing a product with good profit margins. he is making more $ there in a similar position than he was here.. the difference? he says that management is in tune with whats going on, and they don't have the red tape (aka unions) to deal with.

Good Point. In some cases labor unions have priced themselves out of the market. Embraer, a Brazilian jet manufactures business is booming. One reason is a cheap labor force and no unions to contend with. They also get assistance from the Government which helps them out tremendously.

I think the key is the government subsidies. There is no booming aircraft industry anywhere.
I also would council discernment. The media is not doing a very good job covering this story. There is a lot of misinformation out there. Somehow investigative reporting is dead I guess. there is no way hbc can move the complete operation for 400 million.

[ABC]

What, we need subsidies that distort the marketplace?

[BenWSU]

Govt subsidies = Stimulus package

The whole thing about unions: You`ve got guys at Spirit that sweep the floor making $25 an hour and are somehow able to get into the machinists union. Then those people go on strike bitching about wages and benefits when you have college graduates making $12 an hour.

This is why companies move to Mexico. You can pay less for labor and make a plane cheaper while still making a good profit. And nothing will change with Obama in the White House since he's pro union.

[ABC]

There is another layer to this debate.

Think about those that say that increasing K12 funding, higher ed funding, workforce training and the like is what drives jobs and the economy. Well guess what, Louisiana spends less on all of those things than Kansas does. So clearly there are significant limits to that argument.

And, remember those that thought that the downtown arena would help keep people in Wichita? Really? I argued that the arena may or may not be justifiable, but it will not help the economy in Wichita. And it hasn't.

[pogo]

There is another layer to this debate.

Think about those that say that increasing K12 funding, higher ed funding, workforce training and the like is what drives jobs and the economy. Well guess what, Louisiana spends less on all of those things than Kansas does. So clearly there are significant limits to that argument.

And, remember those that thought that the downtown arena would help keep people in Wichita? Really? I argued that the arena may or may not be justifiable, but it will not help the economy in Wichita. And it hasn't.

I would beg to differ in your assuption that anyone thought that IBA would make a difference to the local economy beyond the fact that it kept some construction jobs going that would not have other wise been able to work. The arena is something that addresses quality of life issues. When companies look to stay in Wichita or companies outside of Wichita look to relocate or start up in Wichita they look at intangibles like quality of life. Infrastructure ie parks, entertainment. schools.

[ABC]

Pogo, you make my point for me.

Clearly the IBA isn't enough to keep HBC in Wichita, or they wouldn't even talk to Louisiana folks.

Please show me one city or area in America that "quality of life" stuff was the major driver of an economy. Let me help you. Those places don't exist.

(I will conceded retirement communities in AZ and Florida attract old folks with money.) But Florida doesn't have an income tax.

"Quality of life" things come after the economic growth, or when communities simply decide they want certain things.

Every freaking town in America has an arena. The presence of a downtown arena, or a bar district, or a professional sports fracnhise, simply is not a catalyst for growth. They are the result of growth.

Text book case: the City of St. Louis.

[shockmonster]

I'm not going to be drawn into this argument but I will help. As I recall, the reason brought up for IBA was the "brain drain" that was taking away the young smart homegrown talent that our community was losing to larger communities and that our community needed to maintain business strength. Keeping or not keeping HBC does not prove that this isn't happening. The reason for businesses leaving is because of the deep recession (almost depression). The aircraft jobs were among the best of manufacturing jobs in the country and is another picture of the shrinnking middle class. We'll see if other types of middle class jobs can emerge.