In a blog posted a few weeks ago, I outlined why Mexico is seen by some as the next big emerging aerospace market. A mix of Mexico’s reforming government and its developing skills base has seen many western companies seeking to establish joint ventures and identify future investment opportunities.
But whilst focusing on the rise of emerging markets is essential to identify future growth opportunities, it is the ‘re-rise’ of the US market, particularly the Southern US States, which is of interest to both commentators and manufacturers alike. Online US State-wide news resource ‘Stateline’ has written an interesting article on these developments in the South – identifying some of the key companies and organisations that have been investing in the region over the last few years.
Growth in the region can mainly be traced to lower labour, energy and building costs for manufacturers; state incentive packages which make it easier for companies to set up ventures in the area and business friendly right-to-work laws.
Measures also include extensive industry training programmes that States are able to offer. Airbus’ construction of a new A320 final assembly building in Mobil is a prime example of such state investment. Stateline outlines that Alabama offered around $158 million in incentives to Airbus, including $52 million to build a 40,000-sq-ft, where employees are trained on site at the expense of the state. Alongside this, Airbus were also lured by the logistical scale of the area – the site has expansive land areas for continuous development, 2 large runways and a close proximity to the Port of Mobil and both large interstates and railway stations.
So why should the UK be interested in this growth? Firstly, the US market is substantial for the UK. Civil aerospace exports to the US were around £1.89bn in 2013 (representing the 3rd largest market), and over the last ten years, exports to the US have grown by around 68%. Greater growth in the US will increase the opportunities for UK suppliers already established in the market. Secondly, the build value of Boeing products alone in the next ten years is estimated to be over $1trillion. The UK already has a large footprint on many Boeing aircraft platforms, and in addition to the opportunities raised by the A320 final assembly development, UK suppliers are well placed to be able to benefit.
However, such investment also presents challenges for the UK. Whilst UK suppliers may be able to take initial advantage of demand from new facilities, companies investing in these US sites will seek to develop a more local based supply chain as time goes on – in order to cut down logistical costs and increase production supply flexibility. UK companies must therefore be willing to offer greater cost benefits on their supplies/ components and continue to work with government and private investment in order to develop the new technology and innovation required to compete effectively with local US suppliers.