Spirit AeroSystems’ plan to go public is an impressive measure of how well the former Boeing division has done since last year’s traumatic purchase by Canada’s Onex Corp. and optimistic reinvention as a new company. The planned initial public offering also is the latest indicator of the renewed vigor of Wichita’s aviation manufacturing, which seems at last to have emerged from its turn-of-the-century slump. Now, as this major industry supplier continues to grow and serve Wichita’s economy, it will newly serve shareholders.
Posted by Rhonda Holman
-
Registered?
Commenting on WE Blog now requires you to be a Kansas.com member. Use the links above to register, if you haven't already, or to log in. -
Contact us
Daily Archives
-
Recent Comments
- lindainks55 on Presidential debate thread 10/15
- CF2K on Presidential debate thread 10/15
- Rage on Presidential debate thread 10/15
- CF2K on Presidential debate thread 10/15
- buzzardbiz on Good for McCain for standing up to crowds
- Monkeyhawk on Presidential debate thread 10/15
- CF2K on Presidential debate thread 10/15
- Rage on Presidential debate thread 10/15
- lindainks55 on Presidential debate thread 10/15
- MaxGrobnik on Presidential debate thread 10/15
27 Comments
Onex will recover it’s cash investment with the small public offering, and be sitting in the cat bird’s seat, after their sweet heart purchase.
Does this mean that a Wichita business can be profitable without a government subsidy? The mayor needs to put an end to this before people realize the proper role of government in private business. ;)
Not too fast, ProudMan. From the May 17, 2005 Wichita Business Journal article titled “Council approves Onex IRBs”
“Also included is a 10-year total tax exemption on all bond-financed property and a city application for a sales tax exemption on all bond-financed purchases.”
On Spirit, people have to understand that the free-market aviation industry here tanked in the Depression. It has zero relevance to today’s aviation industry. Today’s industry has its roots in the FDR administration’s scheme to use war to pump federal monies into Wichita to use the city as a magnet for destitute farm kids. I’m not saying this was wrong for the time. It worked. But Wichita could not support a locally-owned aviation industry for the long-term. Which is why outsiders own the plants, and import higher-level engineers. Wichita supplies the blue-collar labor force. And, it is subsidized, which is to say, with tax shifting, employees take home less money than equal-wage earners would in a non-subsidized condition.
Right now, and for the next several years, there’s going to be a lot of overtime, and people will be comfortable. The problem is, aviation will move to Asia over the next 20-25 years. Wichita isn’t investing in any next-generation linchpins to succeed aviation. I suggested nanotech. The Wall Street Journal has reported that nanotech is wide open, in part because it is cheap to get into, relative to say biotech. Ben Huie suggested composites. LA is the world leader in composites. They started making sports equipment like graphite tennis rackets in the 1970’s. When Beechcraft wanted to test composite aircraft, they hired Dick Rutan, the Mojave Desert maestro. WSU’s composite engineering effort is not at the leading edge. But it could make major strides. However this isn’t possible if money is channeled into things like arenas.
Actually you are wrong Heartlander. During the WWII war effort, Wichita became a hotspot in aircraft production because we were in the middle of the country (difficult to attack), and we had a low population of Germans and practially no Japanese people.
Had nothing to do with farm kids.
The news today that Spirit might get some non-Boeing work with EADS on a helicopter projecy might be even more important. If they can get sone Airbus work …
Well, to split the difference. The farm kids were valuable because they knew how to work with and repair machinery. And they were used to hard labor. They were glad to come because the hours were better and the pay was a hell of a lot better.
“The problem is, aviation will move to Asia over the next 20-25 years.”Posted by: heartlander | July 01, 2006 at 04:10 PM
Aviation production or manufacturing may move to Asia, but even that has a limit (defined by some cost element, which in turn depends directly on the financial concept of economic comparative advantages owned by nations operating under conditions of free international trade).
Your argument fails because you’ve failed to account for the vast aircraft-industry knowledge clustered in Wichita, Kansas.
This knowledge, which is more than considerable, will ensure some form of “net marginal aircraft revenue to Wichita,” (depending on things like sale of after-market parts and services, especially) endures in Wichita - as long as the strength of the community holds, that is.
Joe, you’re wrong. That was the PR spin. The majority of planes were built on the coasts, with California dwarfing all other aircraft production centers (Douglas, Lockheed, North American, Consolidated, Northrop) followed by Long Island (Grumman), Seattle (Boeing) and Maryland (Martin). The leading aviation companies were headquartered on the coasts, and their largest production facilities were on the coasts. Inland America got satellite plants, run by coastal-state headquarters. Most of the planes built here were trainers and small transports, until the B-29, which was a “finisher” that was not key to winning the war. (The A-bomb droppers were built under contract to Martin in Omaha. Wichita planes fire-bombed civilians in Japan.) The original idea of the B-29’s being a high altitude bomber failed, because in testing on windless days over the Mojave, the Norden bombsite worked great, but in windy conditions over Japan, the bombs couldn’t hit their targets. The plane became an irrelevance after the war, being superceded by the intercontinental B-36 and jet bombers.
Wichita’s postwar military production was intended to maintain a reserve of manufacturing capacity in case we needed it, but was eventually obviated by higher technology weapons built elsewhere.
My real point is that Wichita probably cannot depend on outsiders to provide permanent jobs for Wichitans and outside-world dollars for Wichita to recirculate. I think Wichitans will have to develop their own product ideas. I think that if research is developed, it will mean recruiting outsiders, but they can become members of the community, and catalyze locally-grown industries. This would be better for Wichita than having bean counters in Canada looking at Wichita workers as ledger statistics and realizing they can get better statistical performance by outsourcing to Asia.
Aviation manufacturing will move to Asia because that’s where most of the customers will be, and all manufacturing is transportable.
Aviation is no exception, which is why southern California’s WWII war aircraft-building juggernaut (over 300,000 workers peak) was transferred to other states in the 1950s and 60s.
In our hemisphere, Canada and Brazil build aircraft. Japan is getting there, after having been frozen out due to WWII-treaty restrictions.
In our own region, Eclipse Aviation chose Albuquerque, while Adam Aircraft went chose Englewood, Colorado over Wichita. They’ve headhunted here, and elsewhere to get the talent they need to design and build plants and FAA-certifiable aircraft.
Wichita’s leaders arguably should have done everything they could to recruit these companies. Yes, they’re going to eat into Cessna and Raytheon’s market share, but the city could have captured a larger market share of the world market. Now it will get a smaller share.—–
I do agree, heartlander, that when overall global aircraft manufacture is growing (and it is), then Wichita’s failure to attract new manufacturers means Wichita’s labor offerings to overall aircraft manufacture (i.e., it’s labor market share) will be smaller.
Also, failing to attract Eclipse cannot be seen as a win for Wichita.
That said, the clustering in Wichita of aeronnautical knowledge led directly to the decision by EADS (Airbus) to establish a wing design center here. Of course this is for design of commercial aircraft, not private aircraft. My understanding is that facility is going gangbusters, reflected directly in staffing levels at its Old Town office. I also understand that, in this facility, Airbus is a net importer of talent. In other words, they’ve had to entice engineers to move here in order to meet the internal demand for their services. In this case, paying an engineer $90,000 per year to live in Wichita is obviously far more cost-effective than having to pay an engineer $120,000 or more to guarantee an equivalent quality of life in Dallas or $150,000 in LA/Long Beach (for example).
In other words, Wichita’s small town lifestyle was important in EADS’ decision to choose Wichita.
My guess (and it’s just that, a WAG) is that, as a per capita share of population, citizens of Wichita’s MSA speak to daily and know more civilian small-aircraft pilots and owners than any other city on Earth.
The key to Wichita’s economic health, with respect to aircraft, depends on its overall aircraft knowledge. It does not necessarily depend on its manufacturing knowledge.
When Wichita begins to lose these knowledge holders - as it did in 2002 - then that’s not good. That Wichita was able to import workers here to meet the current period’s demand for labor - and it has - speaks to the strength of Wichita as a community.
We are being overlooked because of the Unions. Eclipse is set out to revolutionized the small business jet market, but they are years behind schedule. They are also experiencing cash problems.
But Eclipse choose NM, because they could set it up as a non-union shop (Eclipse is non-union), and lots of incentives from the State.
But they might emerge as a key player. I can’t speak for Adam Aircraft, I haven’t heard or read anything about them in a long while.
We have to get rid of our unions that dominate the aircraft labor industry here. I’m not kidding people. I’m not saying this to be a union basher, I’m saying this, because its the truth.
All you have to do is see all the heavy union labor industries (such as those aircraft industries in California that went bye-bye), steal, manufacturing of all kind either die or went offshore. Unions were the cause of them. Now you are seeing the Big American Auto’s doing the same thing, while non-union plants by foriegn auto makers are popping up everywhere.
We need to get rid of the unions if you want to bring more aviation work and companies. If we stick with them, we will see our aviation industry dwindle to not much of anything in 30 years.
Look at Cessna sending work to Independence, because they are non-union. Look at both Cessna and Raytheon sending work overseas, because of Unions.
You might be a union worker or love them because of your left-wing affiliation, but it isn’t going to help us at all.
Ah yes, blame everything on the unions. Was it the unions that forced Boeing into all that corruption with Sears, Druyen, et.al? Was it unions that cooked the books requiring restatements, especially to account for all those stock options? Was it unions that forced those high salaries on top management?
Was it the unions that made Boeing leave you. What is the Unions that just about screwed themselves out of a job.
Wrong side of the issue. I just knew one of you would be defending the Unions.
But you know it’s true. Unions don’t bring more jobs or create them. They hamper jobs and destory them.
Actually Joe, Boeing never “left me” and I am not a union member. Unions have their problems and faults but your blaming them for everything is as false as your blaming John McCain for shining a bright light on Boeing’s culture of corruption.
Well somebody has to build those planes Joe. CEO’s can’t do it.
Joe your post suggests that unions were somehow imposed on the aircraft plants from some outside source that “we” can change. Unless you are for some sort of attempt to make collective bargaining illegal, your arguement is meaningless. The workers in those plants choose by vast majority to be represented by their unions.
As a highly trained and very capable machinist I will not under any circumstance work in a non union shop. There is still enough backbone in the unions that if you busted them you can shut the doors to those places. Unless you think the salaried office workers can build the planes? I’ve seen them try! The result was amusing to watch but had grave implications for safety. Which brings me to…
Oh and the outsourcing you mention? Getting rid of unions is going to do nothing to address that. The workers in Mexico are basically slave labor. Or is that the fate you prefer for American workers Joe? Because unions or no American workers cannot economically compete with foreign workers.
I can tell you about the quality of outsourced aircraft part work from personal experience. I’ll sum it up this way. You get what you pay for. I’d never fly on anything my former employer builds these days.
No Joe you are looking in the wrong place for enemies. If you really care about the future of manufacturing and the working class in this country you need to be advocating against out of control “free” trade. Take the cheap workers outta the equation and those CEOs will get real happy with American workers real quick.
Sorry! But I totally disagree with you JR.
Free trade needs to be extended and collective bargaining isn’t going to make things better.
I hope you are a highly trained and very capable machinist, because most unionized people who claimed to be machinist really don’t know anything. They know how to push a button, but don’t understand the programing or begin to know how to program a CNC machine, let alone even run a lathe.
You are replaceable and a dime a dozen. Robots will replace your line of work in the future. So it’s better to look towards technology rather than the relience of manual labor that the aircraft companies do now. It’s an adequated system to build aircraft the same way we did 50+ years ago.
You can thank the Unions for that. They fight innovation and technology. They rather keep manual labor going. This isn’t going to be our world in the future and all you are doing is generating a huge disservice to your children.
Buggy whips are out my man!
JR, I agree that it’s the absolute difference between current wages and wages paid in the economy to which Wichita manufacturers would oursource labor.
In other words, getting rid of unions is irrelevant when the outsourced wage is already below the US minimum wage.
It’s not quite that simple, though. For instance, most aircraft manufacturers carry a very large liability on their balance sheets for retiree (union) health care. Those are costs incurred now and in the future for past promises.
Unions are always evidence of poor management at some point in the past. That said, many hourly workers shoot themselves in the foot. For instance, when you write things like “There is still enough backbone in the unions that if you busted them you can shut the doors to those places” then you certainly don’t offer any incentive for management to postpone outsourcing.
What I mean is, you just might be surprised how pro-union some exec-office types really are. You can bet your last paycheck that some anti-union exec will make a vigorous attempt to shove a statement like yours up the pro-union person’s ass when the next labor contract comes up. Such bravado does little more than hurry up the outsourcing decision.
Hey Joe?
At what temperature must T3 alclad material be heat treated prior to extrusion or flat stretching? Any machinist I know can answer that question can you?
I don’t know what it is you do for a living but you don’t know a thing about machinists. I find your assertions not only baseless but insulting.
You are for unrestricted free trade? You have also posted that you are opposed to the minimum wage. You posted some bogus numbers and bowed out of a fight with RD on that.
You mention children? Pray tell Joe what jobs those kids are gonna do for a living? There are only so many service jobs.
I have posted that American workers cannot economically compete against foreign workers. Your take seems to be. SO what? Joe don’t you see the danger lurking for a nation that cannot manufacture its own needs?
The picture I’m getting of you Joe is a picture of someone who cares about himself and that is pretty much it. Do you care if America becomes a third world country that can no longer manufacture anything? Do you care about the future of America and Americans? Or is everything hunky dory as long as it doesn’t hit Joe Williams in the butt?
Word to the wise Joe. Eventually the failure of America is gonna hit you too.
I do care about America. Unions workers I find are selfish and only care about themselves. Why don’t they allow younger people to work? Why do they practice nepotism and senority system?
How many people you work with are under 40 years old? And you keep on blaming managment?
Also! I’m assuming you are talking about 2024 Aircraft Aluminum. I’m guessing around the 300 degree range.
No! I don’t think the failure of America is going to hit us, because I don’t believe in the failure of America.
Again! America is great because of the people. America is not great because of government.
You believe in the other way around. That is why we are diameterically opposed to each other.
I don’t believe America will ever fail because we are becoming more educated and self reliant than ever. More and more people have become less dependent on Government and that is a good thing. Especially that old concept, such as collective bargining (a socialist concept) is practially getting wipe off the American scene, and thanks to that we have more equality and more people working then ever before.
We just need to keep it going. And it will. The only failure I see is the Unions ever coming back to dominance with their sledge hammers and concrete shoes.
T3 alclad is a material that doesn’t require heat treating prior to forming. No points this round Joe. Clearly you know a little. Just not as much as this “button pusher”! “Collective” bargaining Joe. Union people are by their very nature NOT selfish. They agree to care about each other. Management sure aint gonna care about them. Not in any good way anyway. Your characterization of unions at least in a “right to work” state like Kansas is so flawed it is difficult to know where to begin. I hired in at 23. I worked with people as young as 18 And in government you have it wrong too. What part of “Of by and for the people” don’t you get? The government IS the people. At least it is SUPPOSED to be. These days it is of by and for the people with the money. You seem to be ok with that too. And you didn’t answer my question about what young Americans are going to do for a living when all the good union manufacting jobs are gone. The middle class will largely disappear too by the way. You also have not weighed in as to the long term survivability of a nation that cannot produce its own goods.
What young people are doing now.
Actually I see a re-emergence of manufacturing coming back into America. But not in the since of Unionized Labor and large manufacturing plants.
But what is called Micro-manufacturing, where manufacuring takes place to supply a local area, not a large manufacturing plant in China supplying every Wal-Mart in the world.
We see it here with non-union machine shops that cater to the local aircraft industry, and soon it will be just about every product on the shelf.
Time and transportation logistics will outway the cheap labor of 3rd world socialist leftist nations.
Actually T3 indicates the heat treatment of that aluminum. You call it alclad, but that is just the surface. The industry indicator is 2024-T3 aluminum.
JR and JW, do you see what you are doing? You are exemplifying the debate that should be happening throughout this country.
After WWII, labor got a fair deal. Europe and Japan’s industries and able-bodied workforces were decimated. We got ultra-cheap raw-material resources. Our 12 million fighting vets scared the s**t out of the capitalists. Labor rose to partnership with the capitalists. Unionization created solidarity.
But the capitalists started funding, using workers’ money, the Third World’s industrialization. Capitalists have always sought cheap, disposable bodies. This is anti-Christian. “We’ll use you until your broken down, then you can go to the scrap-heap.”
After WWII, the capitalists were forced to say, “Okay, we’ll work collaboratively with you. We hate giving up the power of plutocracy, and we will only get rich, not superich, but you leave us no choice.”
So, America was made better. We became a society that THE REST OF HUMANITY WANTED TO BE LIKE.
When I got my first work permit at age 14, the minimum wage was about $9 in today’s dollars. Did that hurt America? No, it did not. Did my employers want to pay me less? Undoubtedly. Did they refuse to hire people at $9/hr and instead close their businesses? Uhm, no.
Union manufacturing jobs pay more than non-union manufacturing jobs. For a community like Wichita, this means that more outside-world-source money gets redistributed, which I suspect that Joe may capture some of.
How about if we created manufacturing plants right here in Wichita to use some of our aeronautics and materials science know-how to build backyard windmills, to lower our citizens’ use of fossil fuels? Why not use our God-given natural energy, combined with intelligence and willingness to work? Some windmill manufacturing owners and their employees could do nicely financially. We’re not a bad place for solar-energy development either. These might even warrant subsidies. How much money is going to be spent subsidizing the capture of Iraq’s oil supplies? Estimates are that this may end up costing a trillion dollars. It wouldn’t take a billion dollar subsidy to set up alternative energy manufacturing here, or elsewhere, but a trillion dollars represents a billion dollars times 1000 communities.
Had Boeing not sold to Onex, they would not have closed down at the start of a big up cycle. Cost did not necessitate the sale. In fact shortly after the sale the remaining union workers in Seattle enjoyed a nice wage and benefit increase.As far as nepostism goes, look no farther than management and salary positions. Unions in Kansas exercise little if any impact on who gets hired, so that argument is ridiculous. In so far as education and experience in the industry goes, there are more educated workers, more experienced in the trade, on the floor than in management, again due to nepositism.
heartlander - not just back-yard windmills but massive turbines throughout western Kansas. Royalties to landowners will help support the local economies; Kansas and the rest of the Plains can be the Saudi Arabia of wind. Electricity, hydrogen can both be generated from wind power.
Ben,
Of course windfarms are proliferating. But homeowner windmills may be a really cool long-term technology. If you generate excess, you can put it on the grid and make money.
More you don’t dissipate much energy with only a couple hundred feet of wiring. So you gain efficiencies not possible with a massive electrical grid.
We might even think, albeit speculatively, of a revolution in appliances from AC (which was developed to address long-transmission voltage loss, to make centralized power generation possible) to DC, which would dovetail nicely with modern electronic devices. We could conceive of at-home chargers for electric cars. I don’t know if battery technology in our foreseeable future will enable us to have electric cars for vacationing, but for daily commutes to work, it’s already doable.
At-home solar is making advances. In traditional economic terms, it isn’t cost-competitive to fossil fuel or nuclear generated electricity. But it doesn’t generate CO2. Fossil fuel burning represents the use of hundreds of millions of years of accumulated solar energy. It generates more CO2 than our world’s photosynthetic species can handle. It cannot be renewed. But solar panels convert current solar energy input, and in this way represent a “balanced”, sustainable form of energy usage.
BTW, on windfarms, why shouldn’t KANSANS manufacture and own the generators, and profit fully from their operation, instead of out-of-staters trying to “mine” this energy for THEIR profit, giving landowners pittance royalties for leasing out space? Are KSU and KU’s engineering schools doing research on this?