With many
U.S. general aviation manufacturing companies experiencing a decline in
business over the past few years, Chinese businesses have begun to invest into
these financially struggling companies. Leaving the American manufacturers with
varying levels of independence, many in the U.S. claim that China is not simply
merging with these companies, but “purchasing” them. The first example of this
being in 2012 when, “Hawker Beechcraft, which filed for bankruptcy protection
in May, plans to sell its civilian aircraft operations to Beijing-based
Superior Aviation Beijing Co. Ltd. for $1.79 billion. Sixty percent of Superior
is owned by a private entity entirely” (Hegeman 2012). As well as a few other
important Kansas based airplane manufacturers. Including other general aviation
giant Cirrus, when Chinese company, “CAIGA last year bought the parent company
of Cirrus Aircraft in the United States. Not only did the Chinese-based firm
keep its U.S. employees, but it pumped in $150 million in development costs to
boost its light jet production. The plane — whose development had been slowed
for years by lack of money — will be built in Cirrus' hometown of Duluth and in
Grand Forks, North Dakota” (Hegeman 2012). Lastly, Cessna has been aligning
with China as well. Whereas Cessna, which was not bought out, still, “signed
with AVIC subsidiary China Aviation Industry General Aircraft Co. Ltd., or
CAIGA, and the Shijiazhuang municipal government. The deal was a step for the
final assembly, sales and customer support for the Cessna Caravan in China for
the Chinese market” (Hegeman 2012).
Why
all of a sudden this need for a general aviation system in China? Because there
is now a market for it, and with the U.S. G.A. market currently in a lull,
these manufacturers need to turn a profit. As well as the possibility to get a
foothold in an emerging region. But there is now a need for these planes that
was not there before mostly because, “China now boasts its fair share of the
world's multibillion-dollar companies and business tycoons. They drive
expensive cars, wear expensive watches, live in expensive homes and work in
expensive offices. But there is still one big thing today's high-flying Chinese
executive lacks: a corporate jet in which to fly high, let alone smaller general
aviation aircraft to fly as a hobby” (Jackson 2012). And with this need,
someone needs to provide the product.
So
with all of these “take-overs” and business deals in General Aviation, what does this mean for U.S. interests? To me, I think it
means an illusionary short term gain for the aviation manufacturing industry,
with potentially dangerous implications for the extended future. This is
primarily because China’s lack of current infrastructure at the moment which is
forcing them to rely on an already developed industry which currently provides
a substantial amount of the world’s aircraft. Once China retains all the usable
information from these U.S. companies it will no longer have any use for them
as they will be able to produce a lower cost product in their own country,
without the hassle of importing them across the globe. And with a lower cost
Chinese alternative on the G.A. market, it will most likely absorb a
substantial portion of the market, resulting in even less jobs for those American
manufacturers who were able to resist being “bought out”. I think this short
term gain will be similar to other areas of U.S. general aviation sector.
Perhaps a boom in Chinese flight students in our country, sent here by their
country to fill the large number of pilot slots, giving the illusion of a
thriving group of future professional pilots in the U.S. While in reality, they
are only sent here because of their country’s lack of training programs, which
when developed, will no longer require them to bring their business to our
country. As well as a slew of other aviation professionals, ranging in their
field of expertise, potentially being sent overseas to help set up the entire
Chinese system.
References
Cox, J. (2010, November
3). China's awakening means vast changes to business and general aviation. Retrieved from http://blog.globalair.com/post/Chinas-awakening-means-vast-changes-to-business-and-general-aviation.aspx
Growth of china's
general aviation market stunted by risks. (2013, August 1). Retrieved from
http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20130801000009&cid=1103
Hegeman, R. (2012, July
16). U.s. plane makers teaming with chinese firms. Retrieved from
http://www.manufacturing.net/news/2012/07/us-plane-makers-teaming-with-chinese-firms
Jackson, C. (2012, May
9). China's general-aviation flight of fancy. Retrieved from
http://online.wsj.com/news/articles/SB10001424052702304451104577391650977428024
This is an insightful view of what is happening both now and in the future. Aircraft manufacturers are reaching for a life raft, and it is hard for them to turn down support even if it is from a foreign source. China lacks the infrastructure to create this industry on their own and before long they will have advanced from their infant stage by acquiring companies in the U.S. The creation of an industry from the ground up will produce an incredible amount of revenue; will they remember the shoulders of the American manufacturers they stood on to get operational? You are likely correct in predicting a short term gain now, and unrecoverable losses in the future.
ReplyDeleteI like your point you made about the potential ramifications of this movement to Chinese based manufacturing. Cessna is already struggling to make a profit on their light GA fleet and having the Chinese produce products much cheaper than there is at the current time, they will be forced to shut down the production lines on many well known and widely used aircraft. The same is happening in the automotive industry, Asian companies are producing much cheaper cars and in a tight economy, many are buying them over the traditional American vehicles.
ReplyDeleteEven though some companies are struggling and on the verge of closing their doors, as you mentioned , other companies like Cessna seem to just be tapping into the opportunities that are arising in China, Cessna is also tying to sell the skycatcher in china as well. I think it's a good move.
ReplyDeleteVery nice post and thoughtful insight! You made a great point that has been taking place for several years now, the movement for companies and production of these materials to China seems more like a move to help a struggling company. With these many of these companies looking for help, China is there with open arms, however it may look like a "save all" move eventually China will develop and build its infrastructure and will no longer need foreign companies to build and learn from it will be able to have its own. Looking overseas for production has been a trend for many manufactures and is now becoming an option for aviation... how far will it go?
ReplyDeleteI am fully on board with the idea that you brought up having to do with the short term gain of our industry here in the U.S. just to most likely have the rug ripped out from under our feet in the long term. Making China the giant super power in this situation will force the U.S. to become weak, dependent and subordinate to China. I think it is a horrible long-term idea but may seem like a good idea for a struggling company currently during this time of financial hardship.
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