Airbus Opens First US Production Plant

Sep 15, 2015

The new $600 million Alabama facility will churn out four planes a month — A319s, A320s and A321s — with possible expansion to as many as eight, and will allow Airbus to avoid exchange rate variations.

Airbus is taking its fight for a bigger market share to rival Boeing’s backyard on Monday, as it inaugurates its first production plant in the United States.

The $600 million facility in Mobile is due to eventually employ about 1,000 workers and help Airbus cut costs. Alabama has one of the lower minimum wages in the United States — $7.25 per hour — and strikes are rare in the state. Employment benefits are about 30% less expensive than in Europe.

“It’s a historic day,” said Airbus CEO Fabrice Bregier. “Having an assembly line in the United States will increase our visibility.”

The inauguration ceremony will take place Monday morning, three years after the project first kicked off. At that time, Airbus had a 20% share of the U.S. market, against 80% for Boeing. Since announcing the Mobile plant, its market share has doubled to 40%.

Based just outside Toulouse, France, Airbus estimates that it will get orders for 5,000 new planes in North America over the next 20 years, betting it will benefit from its U.S. facility among American companies renewing their fleets. By producing in the United States, for example, Airbus will be freed from the variations in euro-to-dollar exchange rate.

Based on the former Brookley Air Force Base where World War II planes were built, the Airbus facility is a 116-acre complex. The company has access to an additional 116 acres if it chooses to expand.

The Mobile plant will assemble single-aisle A319, A320 and A321 jets, its best-selling product first launched in 1988. Starting in 2017, it will also assemble the A320 Neo, a new version with a more fuel-efficient motor. 

Airbus hopes to produce four planes per month starting in 2018, or 40 to 50 per year. But the jetmaker says it can build eight per month.

Bregier notes that plane assembly only accounts for about 10% of the price.

“Mobile does do three things for Airbus,” said Richard Aboulafia of the Teal Group Corporation. “It gives them a larger industrial presence, which could be useful in pursuing defense contracts. It puts pressure on trade unions back in Europe, because labor in Alabama costs less. And it diversifies their currency exposure, which could be useful if the euro gets strong again.”

Source: IndustryWeek