Illinois Manufacturers’ Association
Dec. 2, 2016
Thank you for the introduction, Greg [Baise], and for your leadership of the Illinois Manufacturers’ Association.
Like so many in the room, Boeing is a proud member of IMA. That’s because we recognize the vital role IMA plays in reminding regulators, elected officials and the general public about the important—and indispensable—role American manufacturing has in sustaining the U.S. economy and exports, driving innovation and technology, and creating good jobs.
This is a topic I’m particularly passionate about because I see it firsthand each day at Boeing, where more than 138,000 U.S.-based employees are hard at work, designing and building some of the world’s most advanced and innovative products—which are in turn sold to customers around the world. There’s a good story to tell and one we shouldn’t take for granted.
We also value IMA’s efforts to foster the economic, environmental and public policy conditions manufacturers rely on to succeed. In just the past year, Boeing and our more than 500 Illinois-based suppliers have benefited from IMA’s support on a number of issues ranging from federal priorities such as reauthorization of the Export-Import Bank to state tax provisions. While we haven’t fully achieved all our public policy pursuits, IMA has been an effective advocate and partner, helping to ensure Illinois manufacturers’ voices are heard in Chicago, Springfield and Washington, D.C.
In particular, I’d like to thank Greg and the rest of the IMA team for their support on several fighter jet sales to the U.S. Navy and allied customers. These additional sales will help sustain more than 100 high-tech, good-paying manufacturing jobs at our facility in St. Clair County, Illinois. There, Boeing employees perform assembly and subassembly work on the F/A-18 Super Hornet and F-15 Eagle fighter jets, as well as CH-47 Chinook military helicopter. The additional orders are good news for Boeing and our suppliers, but more important, they fill a gap in the Navy’s fighter jet fleet, which continues to perform numerous missions around the world each day.
So, again, it’s an honor to be here—and it’s a fitting way to end 2016.
This year has been a momentous one for Boeing as we’ve celebrated our centennial as a company. Throughout the year, we’ve reflected on and celebrated the amazing products that helped shape the world and change the course of history, and the generations of Boeing employees, suppliers and partners, and customers who made it all possible.
However, more than just celebrating our past, we set a goal to inspire the next generation of aerospace leaders. Accordingly, we commissioned a number of special signature projects such as Above & Beyond, a 5,000 square-foot traveling aerospace exhibit, designed in partnership with NASA and the Smithsonian, where kids of all ages can design and test-fly their own supersonic jet; pilot a drone into the eye of a hurricane; or take an elevator ride to the edge of space. The exhibit has been traveling around the world for the past year—and arrived in October at Chicago’s Museum of Science and Industry, where it will remain through January 8.
We’re very proud of our 100-year history, but, like the exhibit, we have our sights set on the future and the challenges and opportunities that await us.
I’m guessing that one of the reasons you’re here today—and partly why you’re involved with the Illinois Manufacturers’ Association—is because you’re interested in how government actions (or inactions in some cases) may impact your business. You’re right to take notice because, as manufacturers, we know that what happens in the public sector often has a big impact on the private sector—and in some cases it can be the difference between make or break.
So with that in mind, I’ll share a few thoughts on the key public policy issues that I see impacting Boeing and the aerospace and manufacturing industries more broadly in the coming year.
With a new Congress and administration, 2017 is going to be an important year for the business community and for the manufacturing sector specifically.
I’m not a political pundit or prognosticator—we have too many of those—but anyone who paid attention to the recent campaigns and the election results realizes that one of the overarching themes was apprehension about free and fair trade.
On both sides of the aisle, candidates campaigned to renegotiate trade deals, protect American jobs and, in some cases, pull back from the global organizations and agreements that have set the rules for international commerce for decades.
Now, I’m not here to rehash the election or diagnose the underlying cause of anti-globalization sentiments, but as manufacturers, we have no choice but to think globally. Whether you’re a company of 15 people or 150,000 like Boeing, I’m willing to bet that your business has a global connection.
Today at Boeing, international sales represent a large and growing percentage of our business.
When I started out at Boeing 31 years ago as an aerospace engineer in Seattle, our biggest customers for commercial airplanes included companies such as American, Continental, Delta, Pan-Am and United as well as international carriers such as Air France, British Airways, Lufthansa and others. Today, American, Delta, United, Lufthansa and Air-France/KLM make up the five largest airlines by revenue; however, the top 10 list now includes the likes of China Southern and China Eastern Airlines—two companies that weren’t even founded until 1988—and Emirates, which has one of the youngest fleets in the world.
By way of example, last year, we delivered 495 737s from our factory in Renton, Washington, to customers around the world. One in every three of those 737s were bound for China. And about a quarter of all our airplane deliveries—including wide bodies such as the 787 Dreamliner, 777 and 747—were bound for Chinese customers. This phenomenon would have been unimaginable when I started at the company in 1985.
As recently as 2000, only about 35 percent of our commercial backlog was from customers outside the United States. Today, that number is nearly 75 percent. And the same trend is present in our defense business as well. Although the U.S. military continues to be our largest defense customer, international customers represent almost 40 percent of current backlog—and continues to grow. These numbers are even more impressive when you consider that 90 percent of our total workforce and 80 percent of our suppliers are based here in the United States. International sales have helped Boeing become the country’s largest exporter and in turn help support more than 1.5 million American aerospace sector jobs.
Admittedly, Boeing, by the very nature of what we do is more global than the average company, but the same trends apply across industries. You may be familiar with the statistic that the United States has approximately 5 percent of the world’s population, which means that roughly 95 percent of the world’s potential consumers reside outside our borders. And according to the U.S. Chamber of Commerce, one in four manufacturing jobs directly depends on exports. But even for companies that don’t sell directly to customers outside of the United States, it’s likely that you are a supplier to a company like Boeing, Caterpillar or GE that does.
In the same way that international sales continue to grow as a percentage of our business, so too will competition from abroad. I fully support competition because I believe that it makes us better. There’s no question that Boeing is a stronger, more efficient and innovative company because of fierce competition from our European rival Airbus. And we face increasingly stiff competition from other countries such as Canada, Brazil, China and Russia who are eager to secure a piece of the large and growing aerospace market. However, to compete and win globally we need government’s support to help ensure a level playing field.
A few areas come to mind.
First, it’s critical government creates a business climate that enables economic and job growth.
Reforming our business tax code, which currently taxes U.S. companies at 35 percent—the highest rates among all industrialized countries—would be a great first step. As many in this room can attest, the U.S. tax system is broken. In fact, the United States has the highest statutory corporate tax rate of among developed nations. We also have a worldwide system, meaning that no matter where the income is made, it is taxed by the U.S. government. The net effect is that other countries with lower tax rates become a more attractive place to do business.
We know we need to contribute, but U.S. companies also must be able to invest in the research, development and innovation that fuels growth. Boeing is not sitting on the sidelines on this issue. We are part of the RATE Coalition, a bipartisan collection of dozens of American companies, who together support making the tax code more competitive and transparent. Our tax system should recognize that U.S. companies need to compete globally and should reflect an environment that supports investments in manufacturing and innovation. We’re making progress, but much more work needs to be done.
Second, we need to ensure a fair global trade system that allows American companies to compete on a level global playing field.
During the recent political campaign, we heard a lot of negative rhetoric from Democrats and Republicans about trade deals. Now that the campaign is over, I hope we can work together to make sure the United States continues to play a leading role in shaping the global economy through trade agreements. Because, if we do not lead when it comes to writing these rules, our competitors will write them for us. For Boeing, that could result in higher costs, disrupted supply chains and regulations that diminish our ability to sell products around the world.
We look forward to working with the new administration and Congress to ensure U.S. companies have the tools needed to compete in in the global economy. We know that when U.S. companies can win in new markets overseas, we can grow here at home.
Third, to compete globally American companies need the tools to do the job. One of those tools is the U.S. Export-Import Bank—a small federal agency that extends credit to international customers of American-made goods when commercial financing is unavailable. Many of our customers look to Ex-Im when they can’t secure financing in the commercial market. And more than 250 Illinois companies, of all sizes, used similar Ex-Im financing in the past five years.
A supermajority in Congress recognized the value of the bank to U.S. jobs and voted to fully reauthorize it just over a year ago. But for many, the bank remains closed because it lacks a quorum on its board, which prevents it from extending new financing for sales above $10 million.
If international customers of tractors, turbines, airplanes or satellites can’t get financing from the United States, they’ll simply take their business elsewhere to one of the dozens of other countries with similar export-credit assistance. Along with IMA, Boeing and our more than 13,600 U.S. suppliers will continue to urge Congress to restore the bank as soon as possible.
Fourth, I suspect all of us are interested in speeding up the pace with which we do business—and one way to do that is through regulatory reform. We intend to work with government to streamline regulatory processes such as aircraft certification and foreign military sales to a risk-based certification process.
And, finally, we will continue to urge Congress to eliminate or raise the current budget caps on defense spending—an issue that affects many in the room. These indiscriminate cuts are putting servicemen and women at risk by depriving them of vital products, services and support, and limiting our ability to invest in future innovations.
Underpinning each of these priorities—tax reform, trade, export-credit assistance, regulatory reform and increased defense spending—is the need for businesses to get—and stay—engaged in setting public policy.
What happens in Springfield and Washington, D.C., has a dramatic impact on our businesses, which is why it’s important to make our voices heard.
In the debate over Ex-Im Bank reauthorization, for example, businesses across the country—including some of you in this room through the Illinois Manufacturers’ Association—made their voices heard. After hundreds of meetings on Capitol Hill and with the administration; several supplier fly-ins; individual voices of thousands of employees, suppliers and community leaders, Congress ultimately reauthorized the bank by a supermajority (which only makes the current lack of a board quorum all the more frustrating).
Through advocacy, we have the ability to tell our story to ensure policymakers act in ways that support business and overall economic growth.
Succeeding in the public policy areas I just mentioned is so important because it will allow us to remain focused on driving innovation, technology and productivity improvements that will yield higher quality, reliability and safety for our customers.
In addition to unlocking further innovation, creating a supportive business climate also will allow our industry to continue investing in its most important asset: our people.
Looking back on Boeing’s first century, it’s clear that people were behind every major technical and business milestone. Whether it was Bill Boeing designing the biplane to move mail by air for the first time or the legendary Joe Sutter, the godfather of the 747—the world’s first jumbo jet, no investment has paid off more than the investment we make in people.
Moving forward, one of our most pressing challenges—and greatest needs—will be inspiring a new generation of innovators, dreamers and doers. I hope all of you will think about what it is you can do to invest in future generations of manufacturing talent by exposing them to the wonders of our industry. It’s something we at Boeing are committed to supporting and I know IMA is, too, because it’s vitally important to our future.
In closing, I remain very optimistic about Boeing’s future, our thousands of suppliers and that of the broader manufacturing sector. But to realize the opportunities ahead of us, we need to stay engaged, tell our stories and advocate for the policies and conditions that will allow us to be successful.
Thank you for the opportunity to speak here today.