For C Series jet, Airbus puts price tag on ‘made-in-US’ label

Bloomberg

Securing a “made-in-US” label for Bombardier Inc.’s C Series jet by building another assembly line in Alabama would cost only “a few hundred million dollars,” Airbus SE’s No. 2 executive said.
The new facility is crucial to Airbus’s strategy for increasing US sales of the Canadian
plane while avoiding stiff trade penalties imposed by the
Trump administration. Bombardier projects that passenger jets carrying 100 to 150 passengers will generate 6,000 orders over the next 20 years.
“The minute the plane is assembled in Mobile, it will become American; We would
have a made-in-USA jet,” Airbus Chief Operating Officer Fabrice Bregier said in Montreal. “The US market represents about 30 percent of 6,000 planes, so the rewards are sufficiently important to justify the investment.”
Four days after announcing a deal giving Airbus control of a new joint venture that will
produce the cutting-edge jet, Bregier travelled with CEO Tom Enders to Montreal to lay out their vision for the European-Canadian partnership. Bombardier invested more than $6 billion to develop the jet over the past decade, but the project was bogged down by cost overruns and delays.
The partnership is seen as a solution to Bombardier’s trade dispute with Boeing Co., which accused its Canadian rival of selling the C Series to Delta Air Lines Inc. at “absurdly low prices.” The US Commerce Department has so far sided with Boeing, slapping preliminary tariffs of 300 percent on the Bombardier jets in recent weeks.

Tariff Fight
The made-in-USA label is key to exempting plane sales from import duties, Bregier said. Boeing has said duties will still be levied. Bombardier is already in talks with several potential US customers for the C Series, CEO Alain Bellemare said on Friday in Montreal. In addition to the deal with Delta, JetBlue Airways Corp. is another possible customer, Bregier said earlier.
Expanding Airbus’s current factory in Mobile, Alabama, to build the C Series would be “quite affordable” given the access it would provide to US customers, Bregier said.
Rather than pay cash for its 50.01 percent share, Airbus agreed to contribute its commercial and manufacturing expertise in a bid to cut production costs of the C Series and secure thousands of new orders. Among its first priorities will be using its marketing muscle to renegotiate some of Bombardier’s contracts with major suppliers.
“Airbus brings credibility and volume and in exchange, suppliers are ready to make an effort on price,” Bregier said. “We have to get to this win-win logic with a certain number of big partners of Bombardier and the C Series, and I think we will get there.”
While Bregier declined to say how much Airbus plans to squeeze in expenses, he said a reduced selling price would help Airbus capture at least 2,000
orders in the next two decades. Bombardier’s CS100, the smaller of two variants of the C Series with as few as 108 seats, has a list price of $79.5 million, while the CS300, with as many as 160 seats, goes for $89.5 million.
“If we make it competitive, if we help to reduce its cost to sell it more aggressively, with the credibility that Airbus brings, we will have a market share that is greatly superior to what the analysts expect now,” Bregier said.
Although the deal with Bombardier gives Airbus the right to buy out Bombardier and the Quebec government seven-and-a-half years after the transaction closes, the European planemaker isn’t planning to do so.