Euro Surge Makes It Cheaper To Build Planes In US

If there was ever a doubt to the seriousness of the continuing surge in the value of the euro against the US dollar, consider this: European planemaker Airbus is seriously considering a shift in production of its planes to the United States, because it's cheaper.

The Guardian reports Louis Gallois (above), CEO of Airbus parent company EADS, issued a "wake-up call" to European interests this week, warning the continent was in danger of losing its engineering resources.

"A part of the European aeronautical and space industry is threatened by the evolution of the dollar and I think this is a problem with a political dimension," Gallois said.

To that end, Airbus may build a new plant in the state of Alabama to assemble its planes. The move would allow Airbus to manufacture aircraft in the same currency in which they are sold -- the US dollar.

As ANN has reported, the current discrepancy in value between the euro and the dollar have hit the planemaker hard. Currently, Airbus builds its planes in euros... slashing the planemaker's profit when it comes time to deliver those aircraft.

Gallois also called for an emergency meeting of the G7 nations, to address the exchange rate. As of Tuesday, one euro was worth $1.46 -- three cents off its all-time peak.

"There is a deep crisis in a number of industries solely due to the fact that the Americans are carrying out a policy that translates as the endless fall of the dollar," Gallois said, echoing similar statements by Airbus CEO Tom Enders.

Despite the seriousness of the exchange-rate problem for Airbus, however, there was an additional political undertone to Gallois' comments.

According to sources inside EADS, Airbus would only consider building a plant in Alabama, if a team comprised of Northrop Grumman and EADS is chosen to build a new aerial refueling tanker, based on the Airbus A330-200 commercial airliner, for the US Air Force.

"But a precondition would be that we win the tanker contract," one unnamed source said.

The Pentagon is expected to make its decision on the KC-X contract in early 2008... and analysts say it remains a 50/50 battle between the EADS offering, and Boeing's KC-767.

FMI: www.airbus.com