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2001 Speeches
Phil Condit portrait

Phil Condit

Chairman and CEO

The Boeing Company

"Export-Import Annual Conference "

Washington, D.C.

April 05, 2001

(As Prepared for Delivery)

Thank you, Jim (Harmon).

I'm glad to be here. Boeing has had a long, positive history with the Export-Import Bank of the United States. The Ex-Im has contributed significantly to our company's success over the last 20 years. We also think it will be important to our future as the world economy becomes even more global than it is today.

Today, 50 percent of Boeing's commercial customers are overseas. These customers reside in 145 countries and represent a wide range of economic circumstances. For many of these customers, the ability to purchase an American product -- especially a big-ticket item such as an aircraft -- is directly dependent on the availability of Ex-Im loan guarantees. Over the last five years, Ex-Im's loan guarantee program has made it possible for overseas customers to secure loans from the private financial market to purchase $3.6 billion in Boeing aircraft annually.

I know many of you are very familiar with the loan guarantee program, but it seems there is still a lot of misunderstanding about it. The majority of the Ex-Im activity, better than 90 percent, is in loan guarantees, whereby the faith and credit of the U.S. government make it possible for certain foreign customers to secure commercial loans. These government guarantees represent a temporary set aside of federal funds -- not a federal expenditure -- until the loans are repaid. These guarantees are not a subsidy, and they are not a cost to the American taxpayer. Some people assume that the Ex-Im Bank's primary business is direct loans, but such loans represent less than 10 percent of the Bank's business. In fact, Ex-Im programs have had a default rate of 2 percent, which is lower than that of commercial banks.

As the nation's largest exporter, Boeing has many first-hand stories about how much the global economy and the actions of other nations affect American business. The slump of the Asian economy a few years ago is a good example. Boeing was impacted when we found that our customers could no longer take delivery on more than $1 billion worth of aircraft. Our Asian customers, who normally secure private financing, sought the Ex-Im's help in order to take delivery. Fortunately, the Bank was able to step in during this financial crisis, which allowed us to deliver the aircraft.

Today, virtually every regional aircraft market is growing two to three times faster than the U.S. market. Over the next 20 years, Asia will become the second-largest aircraft market in the world. Access to such global markets is a critical part of our future. And it's not just critical to Boeing's future, but to many other Americans as well.

For example, when I say Boeing is the largest exporter of manufactured goods in the nation, that statement is a bit misleading: Boeing is the exporter, not the manufacturer. There are about six million parts in a single aircraft, and more than 60 percent of those parts are made outside of Boeing by tens of thousands of people at American companies. In fact, in 1999, Boeing Commercial Airplanes awarded more than $13 billion in contracts to thousands of other U.S. companies to provide supplies and parts for the manufacture of commercial aircraft. If we look beyond Boeing, exports for the entire U.S. aerospace sector totaled nearly $55 billion last year. The entire aerospace industry is one sector of the U.S. economy that has a positive net trade balance. For calendar year 2000, the U.S. aerospace industry had a net trade balance of $26.8 billion. The truth is, exports are important -- to all of us -- not just to Boeing, John Deere, and other heavy equipment manufacturers.

Financing sources are important, too. The Japanese economy is lagging, which impacts one of our largest financiers of aircraft. As Japan's economy suffers, so does the ability of our foreign customers to obtain large Japanese aircraft loans. Two phenomena happening at once make financing for overseas customers -- especially for large products -- that much more difficult. First, for example, commercial money from the usual lenders is much tighter, making them more risk averse. Second, at the same time, economies that have been stabilizing, or improving, see less stability. Economic systems become more tenuous, so loans to customers in those nations may be perceived as riskier. The net result: there is very little commercial loan money for an increasing number of overseas customers. But I don't want to mislead anyone when I talk about riskier markets -- Ex-Im has not lost a single dollar on an aircraft guarantee in the last 10 years.

It might be useful to share a specific example on the critical role financing plays. Boeing was competing against Airbus for aircraft sales to three airlines from a single region of the world. One of these airlines was a long-term Boeing customer who had never bought an Airbus airplane. This customer was offered an extremely aggressive financing package by Airbus -- with longer-term financing and below-market interest rate caps -- substantially reducing the airline's monthly payments. Anyone with a home mortgage can understand the concept. The longer mortgage period, coupled with the lower interest rate, results in lower monthly payments. When the two other airlines became aware of the new financing deal, they bargained for the same package. In the end, Boeing lost sales for more than 100 aircraft to Airbus -- primarily because of financing.

Airbus can offer these bargains because it has easier access to money from three export credit agencies (ECAs). These agencies have much larger pots of money and fewer limitations on the structure of the deal, and this tends to operate as the equivalent of "pre-approval" authority. Also funds are available from a state-owned German entity that offers below-cost money.

In case you think I am exaggerating the importance of the Ex-Im Bank, you only need to look at what financing is available to our foreign competitors. Airbus uses export credit agencies in Britain, Germany, and France. Let's look just at Germany and France. While Germany's Gross Domestic Product (GDP) is less than one-quarter that of the United States' $9 trillion, Germany's export credit agency supported more than one-and-half times the export sales of the U.S. Ex-Im Bank. France, meanwhile, has a GDP one-sixth that of the United States; yet France's ECA supported more than four times the export sales of the U.S. Ex-Im Bank. Maybe this makes it easier to understand why Boeing worries about any additional limitations -- whether it is a new bureaucratic hurdle or a new cut in funding -- on the Ex-Im Bank, our only financing option.

That's only part of the picture. Airbus has access to several financing sources that are not available to U.S. companies. The United States has only the Ex-Im Bank, yet some people want to cut Ex-Im funding by 25 percent. I believe we have the opportunity to make the Ex-Im Bank a world-class competitor among global export credit agencies. We should take that opportunity. Full funding -- $1.4 billion -- should be provided for the Ex-Im Bank, and action should be swift to reauthorize the Bank for five years.

We all want responsible government spending, but I believe failure to support this critical government program, which does not add to government spending, would compromise the competitiveness of U.S. companies in this increasingly global economy. If the United States is to protect access to the global market, the federal government must have policies and tools that recognize the importance of every export sale because the global economy is here to stay. If Boeing plans to be a part of it, and I know we do, we must make sure that we have the necessary tools in place to ensure the competitiveness of American companies. I place the Ex-Im Bank at the top of that list.

Thank you.