Boeing's China Facility Reveals Its Solid Plan for the Future
Moves made by companies overseas are important factors to consider in online stock trading. That's because those actions affect investor perception and stock value.
How Boeing Is Overcoming US-China Trade Tensions
Despite the talks and fears of US-China trade relations and tensions, American aircraft company Boeing ($BA) has been confidently sailing through the rough waters and going ahead with plans to complete and deliver its 737 passenger airplanes in China. It delivered its first 737 from its Chinese facility on Saturday, December 15, 2018. It's a 737 MAX 8 delivered to Air China.
The new facility has the capability to complete up to 100 of these 737 MAX aircrafts each year. The deliveries are intended for Chinese carriers and, while that seems a significant number, Motley Fool's Adam Levine-Weinberg reveals that is still lesser than the regular 737s that typically get delivered every year to Chinese airlines.
Boeing Doesn't Want to Lose Chinese Market Share to Airbus
Boeing isn't the only international airplane manufacturer to make planes in China. Airbus ($EADSY) has also significant production activities in China. The criticism leveled at Boeing for its China operations has only cast a shadow on the company's activities. And it makes business sense for Boeing too. Given that Airbus builds aircraft belonging to the A320 family in Tianjin, it was significantly ahead of Boeing in having a representation in the Chinese industry. Boeing would have risked losing significant Chinese business if it had decided not to set up a completion and delivery facility in the country.
The Reasoning behind Boeing's China Decision
The idea first came to Boeing back in late 2015. Since orders placed by Chinese airlines are, to some extent, government controlled, it was initially conceived as a way to please the Chinese leaders. Boeing and COMAC, its Chinese partner, had announced back in 2016 that they would set up an airplane completion and delivery facility in Zhoushan. While criticism was leveled at Boeing particularly from the then presidential candidate Donald Trump, Boeing was sure that opening a facility in China wouldn't result in layoffs in the United States. After all, there are only 300 workers employed at the Zhoushan center. The greater risk for the company, though, was losing Chinese market share which it just couldn't have afforded to see happening.
How Boeing Has the Upper Hand over Airbus
Trade tensions place a risk for Boeing, but it does have the upper hand over Airbus now in the important Chinese aviation market where orders just keep coming. Airbus has a significant order backlog that it is struggling to meet. As long as Boeing is able to meet its Chinese demand, it is in a strong position in the case of a potential recession when orders could get cancelled. Airbus orders are likelier to get axed or deferred.
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