Sunday, March 2, 2008

Outsourcing of American Jobs -- Boeing

Guess which line is Boeing and which is EADS?

Boeing just "lost" a $40B contract to produce the Air Force's refueling supertankers to European airplane manufacturer, EADS (the parent company of Airbus). Obviously, a lot of rhetoric about outsourcing US jobs and the idea that US taxpayer money is being diverted to a European airplane manufacturer has followed. There's been much written about the issue of protectionism and subsidies that the EU has used to make the European airplane manufacturers more (and unfairly) competitive vs. Boeing.

But in this case, the issue might ultimately come down to the simple idea that EADS designed a better, more efficient supertanker than Boeing. Maybe jobs wouldn't "get outsourced" if America remained competitive from a product offering perspective.

I mean absolutely no disrespect to any worker who's job might be at risk, quite the contrary. I would argue that the management teams at the top of the pyramid are ultimately responsible for setting the strategy and execution to design and build products which are better than its competition. So again, for me, this feels like an "agency issue"; if the CEO of Boeing sets a crappy strategy and gets out maneuvered by the competition, he might lose his job, but his quality of life and earnings are not impacted as greatly as the person who puts the rivets into a wing so that you and I can get somewhere safely. (Yeah, think about that, and then hope that there is redundancy built into the plane your on so that the disgruntled rivet dude can forget a rivet or two. )

For Boeing, it's a lot like my complaint about McNabb. Shut up and play. If Boeing made an aircraft that's better than the EADS design, then jobs wouldn't get "outsourced." But then again, I don't know, maybe the folks at Boeing do get it, and quite possibly, it's the media and the politicians who beat the "outsourcing" drum in the name of ratings and votes. Outsourcing for low-cost labor to remain competitive is a legitimate issue in a lot of industries. And there is no doubt about it, jobs that may have been created here will be created in France, which from a national view, totally sucks. But competition is absolutely neccesary; it drives innovation and moves us forward. Without it, there's no incentive to create better things. The media and politicians are putting the cart before the horse in this case, IMHO.

If you want a simple solution to this "problem"
, have key gov't contracts like this only open to U.S. based companies. Then you can avoid the problem. But you do realize the law of unintended consequences. Maybe the plane is less fuel efficient, costs more in fuel and operation costs, which then translates into higher taxes, and worse, a plane that puts our soldiers in harms way. There are no easy answers except that to stay competitive, design and build a better product. Sometimes fear of our competition can be a great motivator.