US export companies look to other shores as EXIM shuts down
The closure of the US Export-Import Bank (EXIM) charter is forcing the US companies to explore business options overseas. Major aerospace companies, which have been benefiting from export financing and other encouraging schemes from EXIM, are in favor of shifting out of the US. General Electric (GE) has already firmed up to its plan to set up $400-million turboprop engine in Europe. Aerospace Industries Association (AIA), the largest US aerospace trade group, expresses concerns that many aviation companies are losing their competitiveness in the absence of support from EXIM. However, conservative Republicans are against EXIM charter as it's confined to only three major companies.
The EXIM charter expired in June. This causes concern over the companies involved in foreign trade and aviation companies as they lack the export financing and other SOPs from EXIM. AIA is lobbying with the Congress members to restore EXIM.
The ongoing election campaign for US President position has led to the current situation. Conservative Republicans are raising their voice against EXIM while aviation majors such as Boeing and GE argue that absence of EXIM will kill the competitiveness of the US industry.
David Melcher, President, Aerospace Industries Association, said: "Any company that has traditionally depended on EXIM financing as of their strategy to sell internationally will start to hedge their bets with thoughts of moving their business overseas where they can get that support from a different government."
Boeing Co and other aviation companies are on the losing end as they can't access to the US trade credits.
Export finance and other SOPs play a key role in the aviation industry on the global level. Corporate companies will move to a place where they get support to their business, according to the industry body.
For over 80 years, the US Export-Import Bank has been serving as the charter authorized the credit agency in providing export finance to the US companies. Generally, EXIM guarantees loans availed by US companies to sell their products in the global market.
EXIM provided $20.5billion credit support in 2014. Over 1.3million jobs are depend upon export business. However, the criticism mainly from conservative Republicans is that 87 percent of loan guarantees accounted for just three companies-- Boeing, General Electric, and Caterpillar.
The main reason for deciding to set up new turboprop engine plant in Europe was the lack of export financing in the US, said GE. The decision will see the moving of 500 jobs in the US power turbine manufacturing to Europe and China.
In last July, Boeing Chairman Jim McNerney announced the company's plans to going overseas in addition to shifting the operations to other countries as well. However, Boeing is yet to announce its specific plans for the near future.
In the absence of EXIM, many major and smaller companies are losing orders. GE and Boeing are the global leaders and quickly announced their immediate plans. Many smaller companies are also exploring ways and options on how to set up their base elsewhere.
Since a sufficient number of lawmakers supporting EXIM revival, AIA is confident of restoring the bank. If House Speaker John Boehner allows the move for a vote, then it will get majority support, according to Melcher.
Some conservative Republicans are against it, but they can't stop the passage of voting as the majority members are supporting it, he said.