Trump Talk Rattles Aerospace Industry, Up and Down Supply Chain

2017-02-23 11:59:13

 

Trump Talk Rattles Aerospace Industry, Up and Down Supply Chain

CHEHALIS, Wash. — At this small factory south of Seattle, employees make one of the most specialized products in the aerospace industry: the rubber mats that Boeing workers stand on while assembling jets. As long as there are jets and Boeing, business would seem to be steady. But even here workers are bracing for bumps and economic uncertainty over the gritty details of where aviation parts get made and who makes them.

President Trump has talked about border tariffs and new trade deals that many people in aerospace fear could raise the cost of American airplanes bought by foreign airlines or governments. And if Boeing’s sales or profits suffer, its nerve-system supply chain — more than 13,000 companies across the United States, and more than 1.5 million jobs — would most likely feel the pain, too. At SmartCells, 50 full-time employees and a few dozen temporary workers stamp out cushion pads on heavy machines. Executives work in a red building everyone calls the barn, and first names are the rule. Washington feels far away, but it is on just about everybody’s radar.

“Let’s hit it with a two-by-four and see how it reacts, then get a plan,” said Bob Bishop, the chief operations officer at SmartCells, describing Mr. Trump’s hard-charging style. “That doesn’t always work.”

The anxiety, said Mr. Bishop, 46, a former deputy county sheriff who voted for Mr. Trump, centers not so much on politics as economics, specifically the intense competition with the French airplane maker Airbus, which competes toe to toe with Boeing for jet orders in countries around the world in a delicate game of narrow cost differences and giant contracts.

Mr. Trump has said he would seek a 45 percent tariff on imports from China, for example, to protect American jobs, and a 20 percent tariff on goods from Mexico. If business costs for Boeing go up as a result, the company — the nation’s single largest exporter by dollar volume — probably would not be able to raise prices on its airplanes to make up the difference, because then it would lose customers to Airbus. For workers and suppliers, the fallout could be brutal.

“So what does it mean? It means they may cut jobs,” said Kevin Michaels, the managing director at AeroDynamic Advisory, a specialized market analysis company in Ann Arbor, Mich. “It’s a very complex field.”

And one that is already changing. Boeing’s commercial airplane division cut 8 percent of its work force, or over 6,000 jobs, in the United States last year. Some companies in the supply chain, partly because of cost-cutting pressure by Boeing, have shrunk or merged. Since his election, Mr. Trump has tried to pit American aviation companies against one another over the costs of new fighter jets, and has harshly criticized Boeing’s high price tag for a new Air Force One presidential plane. Boeing, founded in Seattle in 1916, employs about 140,000 people in the United States, about half of them in Washington State.

“We’ve got such a huge network here — anything that curtails exports hurts the entire supply chain,” said John Thornquist, the director of the aerospace office at the Washington State Department of Commerce. “We’re very vulnerable.”

Companies that sell to Boeing, or sell to other companies that build Boeing components, said that even predicting a trade war was risky, with so many variables — politics, economics, multiple countries — all in play. A modern commercial jetliner can have up to six million components that must be engineered and tested to safety standards, even before assembly starts.

“We’re trying to do our best due diligence to put together an assessment, but at this time, the best we can do is just monitor day by day,” said Maurizio Miozza, the vice president for development and strategic planning at Umbra Cuscinetti, an Italian company that makes precision parts for Boeing and that has about 100 employees north of Seattle. But, he added, “the picture is not rosy.”

“You prepare yourself for the worst and hope for the best,” he said.

Other aerospace companies were hesitant to discuss their worries because it might draw unwanted attention — from competitors, the White House or foreign governments. It is not a good time, several said, to take chances.

Boeing declined an interview request for this article, but said in an email statement that talks with the Trump administration were continuing. “The administration has made it clear that they are pro-economic growth, including in exports and manufacturing jobs,” the company said. “We are engaged with the administration in direct and productive discussion.”

In any small business, optimism and practicality are lifeblood forces, and SmartCells’ president, Bryce L. Betteridge, a chemical engineer, says he believes the company’s future is bright. A trade-secret mix of polymers and wafflelike molds creates the upward bounce of a SmartCells mat, which reduces fatigue for a standing person and can also prevent injuries in falls, he said.

The company has already diversified. Amazon warehouse workers and Costco checkout clerks — both employed by companies that started out in the Seattle area — stand on SmartCells mats. And Mr. Betteridge mentioned other new markets and ideas with enthusiasm: rifle stocks, nursing home floors, playgrounds. No idea for a better cushion seems beyond reach.

But he said the company’s strategy for the future was shifting on the assumption that international trade under Mr. Trump would become more difficult. For one thing, he said, he has now discarded any thought of expanding the company into China, Mexico or anywhere else where SmartCells’ products could be made and brought into the United States for sale. “That benefit is going to go away, I anticipate,” Mr. Betteridge said.

And it is simply too expensive to export heavy, relatively low-cost products like cushion mats to other countries from Washington, he said. That means the company’s growth in foreign markets, when or if it happens, will probably come through licensing the technology to manufacturers abroad, which will then hire local workers. Sales and marketing positions might be added here in Chehalis, Mr. Betteridge said, but no added manufacturing jobs would be needed.

But a pressure to “buy American” coming from the White House could also be a powerful force, he and other industry leaders said, if companies like Boeing ultimately shift a greater proportion of their airplane component purchases to suppliers in the United States. Currently, Boeing spends about 80 percent of its $40 billion annual supply-chain budget in the United States, and exports about 75 percent of its products.

“Some of the suppliers in Puget Sound might actually be rooting for this, because in the long run it could benefit them,” Mr. Michaels, the industry analyst, said.

Kurt Mullins, 56, a former lumber millworker who has been at SmartCells for about a year and a half, often installs floor cushioning systems at Boeing, where he hears the worries of workers there, too. “I think it’s going to get worse before it gets better,” Mr. Mullins said.

Add comment