Zero Hedge
All posts from Zero Hedge
Zero Hedge in Zero Hedge,

First Ex-Im Casualty: Boeing Loses Deal Due To "Credit Woes"

Before Congress left town for the August recess, the Senate passed a three-month transportation spending bill designed to keep the Highway Trust Fund solvent for another 90 days. This means construction on roads and bridges didn’t immediately grind to a halt last Friday and it also means Congress - which recently has demonstrated a remarkable inability to legislate anything - will need to come to an agreement on a longer-term solution at the end of October. Expect that to be a fight, and one bone of contention will be the Export Import bank whose charter expired at the end of June. 

The Depression-era institution provides financing for US exporters and their customers, and when the three-month Highway Trust Fund patch didn't include a rescue plan for the bank, beneficiaries were up in arms. "We’re at a loss how Congress can literally go on vacation and just say, 'Good luck, guys,'" Tyler Schroeder, a financial analyst at the Texas-based Air Tractor told Politico.

Conservatives - notably the Tea Party - claim the bank essentially represents a welfare program for corporations. Those corporations, the bank’s supporters argue, may move jobs overseas if the bank is relegated to the annals of history. 

Boeing has been particularly vocal about its plans to go offshore.

"We’re actively considering now moving key pieces of our company to other countries, and we would’ve never considered that before this craziness on Ex-Im," chairman Jim McNerney said last Wednesday.

By the time he made that statement, McNerney had already been given a preview of what this "craziness" may mean for Boeing, because as Reuters reports, the company lost a deal worth "several hundred million dollars" in mid-July after the buyer backed out citing Export Import Bank concerns. Here’s more:

Boeing is scrambling to find alternate financing for a satellite contract worth "several hundred million dollars" that was scuttled by privately held commercial satellite provider ABS due to uncertainty about the future of the U.S. Export-Import Bank, three sources familiar with the matter said on Tuesday.


ABS, based in Bermuda and Hong Kong, terminated its order for the satellite in mid-July, citing the expiration of the trade bank's charter on June 30, according to the sources, who asked not to be named given the sensitivity of the issue.


The termination marks the first known casualty of the ongoing congressional debate over the future of the trade bank, which lends money to U.S. exporters and their foreign customers.


ABS told Boeing, the largest U.S. exporter, that it would have to consider non-U.S.-based producers to build ABS-8, given the absence of U.S. export credit financing, the sources said.


Boeing first announced the ABS contract in June, saying the new satellite, scheduled for delivery in 2017, would expand broadcast and enterprise services to Australia, New Zealand, the Middle East, Russia, South Asia and Southeast Asia.


GE last week said it was also taking steps to shift some manufacturing work overseas now that the bank will be shuttered at least until September.

So while opponents will likely continue to claim the private sector can step in to provide the same financing and assistance as that provided by the bank, and that ultimately, ExIm is nothing more than a "vast, well-funded network of consultants, lobbyists and big-government interest groups" (to quote Heritage Action Chief Executive Officer Michael Needham), those arguments aren't likely to go over well with workers who lose their jobs when the corporate management teams at Boeing and GE decide it's time to remind Congress of who is really in charge by laying off Americans and moving the jobs overseas, which is why suspect it's just a matter of time before the "bring back our jobs, bring back ExIm" rallies begin.