Airbus: Entering Chinese Airspace for the Right Reasons?

So it seems like just about every other major manufacturer in the world, Airbus is also taking the China sourcing plunge into the deep end, at least according to this article in Forbes. According to the piece, "Airbus parent EADS will open its first sourcing office in Beijing later this year as part of efforts to develop a long-term procurement strategy ... The office, which will be run by EADS China, will conduct procurement support and supplier development in China for the Airbus and Eurocopter units ... EADS bought at least 60 mln usd worth of products from Chinese suppliers in 2006. Its annual procurement is expected to exceed 120 million US dollars in China by 2010."

As I look at this picture as an A&D outsider, I can't help but wonder how much of this move is attributed to meeting offset requirements and to help drum up local business -- the right reasons to make the move -- versus simply trying to lower Airbus' bloated cost structure (in this regard, global sourcing is but one arrow in the quiver -- and not always an effective one at that within A&D). For the sake of promoting long-term competition in the commercial aviation sector, let's hope that Airbus does not go down Chrysler's futile cost-reduction China sourcing path and instead is signaling to the market with this move that they really are serious about being more competitive on a global, sustainable basis with Boeing. After all, China represents a tremendous sales opportunity in commercial aviation -- in fact, far more than a sourcing one, at this stage in the trade game.

Jason Busch

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