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Secret Wounds of Globalism: Boeing Sells Its Technology -- Cheap -- to Japan
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After some scarifying teething problems, the Boeing Dreamliner now seems to be becoming belatedly accepted as the wonder plane it was always cracked up to be. Though that is excellent news, it says far less about the health of the U.S. aerospace industry than Boeing executives would have you to believe.

The fact is that the Dreamliner is probably the most extensively outsourced passenger plane in American aerospace history – and that is just the beginning of a bewildering story of globalism-gone-mad that is now threatening the future of America’s last remaining serious manufacturing industry.

On Boeing’s own figures as released a decade ago (and virtually never reported either at the time or since), only 35 percent of the Dreamliner is being built in the United States — and as far as I can see that may be an overestimate.

Again on Boeing’s own figures, another 35 percent is being contributed by Japanese suppliers — and there are grounds for believing that this may be an underestimate. As for the remaining 30 percent, it is coming from all over, not least from Italy, Korea, France, Germany, and even China.

It is all a far cry from the original version of the Boeing 747 — the jumbo jet launched in 1970 — which was about 98 percent American-made. Why can’t America make its own planes any more? Why indeed. The question seems all the more pertinent for the fact that American wages in 1970 were far higher relative to the rest of the world than they are today.

The truth is that top Boeing executives seem to have blancmange where their spines should be. Under constant pressure to outsource more of each new jet to other manufacturing nations, they seem to have caved every time. Not only that, they have transferred vast tranches of Boeing’s vital manufacturing technology — accumulated through decades of learning by doing — to foreign suppliers.

The Japanese in particular have played Boeing like a violin. On the one they have been prepared to pay top-dollar for Boeing planes — but have insisted in return that Boeing transfer more and more of its erstwhile most carefully guarded manufacturing secrets. In the short term agreeing to Japan’s demands may have seemed like a great idea because it boosted immediate profits and by extension, of course, the value of top executives’ stock options. But the long run effects have included not only the loss of tens of thousands of American jobs but the weakening of the U.S. trade balance. And, of course, in the end Boeing’s entire future is called into question.


Boeing’s handling of the Dreamliner has been particularly egregious because in return for large Japanese airline orders, the company agreed to have the plane’s super-advanced wings made in Japan. The major work is being done by Mitsubishi Heavy Industries using carbon fiber supplied by Tokyo-based Toray. Boeing moreover gave the Japanese its wing-making secrets, which it had long regarded as its crown jewels. The thinking previously had been that so long as the Japanese could not make serious wings, they would never become independent players in the passenger jet industry.

The key point is that Boeing did not have to do this. Its bargaining position was impregnable. After all the Japanese should feel obligated to do something in return for the defense umbrella the United States has so assiduously extended over their nation for more than half a century. Moreover their only other source of large passenger jets, Airbus, is a German/French consortium that assuredly is not in the business of transferring state-of-the-art technology to anyone, let alone to such potentially deadly rivals as the Japanese.

The worst part of it is that the Japanese aerospace industry is now readying to launch its own passenger jets. Mitsubishi is developing a 90-seat regional jet which is due to enter service in 2017. Although this plane will not present much direct competition for the American airframe industry, it will stand in broadly the same position to that industry as, say, the Honda Accord did to the U.S. auto industry in the 1970s – the thin edge of a wedge.

The one encouraging aspect of this story is that some Boeing executives clearly have now concluded that outsourcing has been taken too far. There is even talk that the wings for the 777x, a stretch version of the 777 expected to be launched early in the 2020s, will feature U.S.-made carbon fiber wings. Questions remain about how much exactly of the added value will truly originate in the United States and how much will represent foreign-made components, subcomponents, and materials that will be merely the subject of final assembly in the United States. Unfortunately few details are so far available and Boeing has declined to be interviewed.

The sorry story of Dreamliner’s outsourcing is recounted in detail in a cover story I have just published in the American Conservative. The article can be read here.

(Republished from Forbes by permission of author or representative)
• Category: Economics • Tags: Boeing, Japan 
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