Boeing CEO to push Biden for 'productive dialogue' with China
David Calhoun: 'China represents 25% of the global growth in our industry over the next decade'
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Boeing CEO David Calhoun says he will advocate for the Biden administration to pursue a better trade relationship with China.
"Given the importance of the Chinese market to our near-term delivery profile, as well as future orders which influence future production rates, we will continue to engage with leaders in both countries to urge a productive dialogue, reiterating the mutual economic benefits of a strong and prosperous aerospace industry," Calhoun told analysts on Boeing's first-quarter earnings call Wednesday morning, "China represents 25% of the global growth in our industry over the next decade."
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Boeing was caught in the crosshairs of the Trump administration's trade war with China, which involved tariffs on about $370 billion worth of goods as part of an effort to crack down on the theft of intellectual property and China's human rights abuses, which the country vehemently denies.
Calhoun told the U.S. Chamber of Commerce's Aviation Summit last month that he hoped the two countries could separate intellectual property and humans rights issues from their trade relationship to prevent Boeing from being locked out of the Chinese market.
However, the author of "The Great U.S.-China Tech War", Gordon Chang, argues that even if Boeing gets locked out, the company has a duopoly with its competitor Airbus.
"That means if Boeing is shut out of the China market, Airbus will sell. But Airbus can only make so many planes a year," Chang told FOX Business. "So there's less of a concern here than Boeing would like to make it look like, because if Boeing doesn't sell [to China], Boeing will sell to [other] Airbus customers."
"If [Calhoun] wants to talk about trade, he needs to come up with an explanation or an alternative way of protecting our IP," Chang added. "It's just as simple as that."
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The Biden administration is expected to face strong pressure to grant exemptions from the tariffs. The tariffs could also be reduced or scrapped altogether. However, Chang believes the tariffs are holding China accountable for its failure to meet commitments agreed to in the Phase One trade deal and are needed to establish deterrence.
"If we don't do that, our children are going to look at us and say, 'You had the means to protect the United States from China and you didn't do it'," Chang said.
United States Trade Representative Katherine Tai told lawmakers on Wednesday that she would conduct a top-to-bottom review of the China trade policy, including tariffs. While Tai emphasized she would work to hold Beijing accountable for its Phase One trade deal commitments, no meeting has been scheduled with Chinese counterparts, despite the agreement's requirements for semi-annual discussions.
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Calhoun's push comes as Boeing reported a loss of $561 million in its first quarter, or $0.92 per share, compared with a loss of $641 million, or $1.11 per share, a year ago. Total revenue came in at $15.2 billion, primarily due to lower 787 deliveries and commercial services volume.
Boeing sees 2021 as an "inflection point" as COVID-19 vaccine distribution accelerates and industry and government work together to enable a "robust recovery."
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BA | THE BOEING CO. | 149.27 | +5.87 | +4.09% |
Boeing's commercial airplane revenue decreased 31% in the quarter to $4.3 billion. The commercial airplane segment delivered 77 airplanes and secured orders for 148 of the 737 aircraft from customers including Southwest Airlines, United Airlines, Alaska Airlines, and four 747 freighter aircraft from Atlas Air.
The 737 program is currently producing five aircraft per month and will gradually increase production to 31 aircraft per month in early 2022 as market demand increases. Meanwhile, deliveries of the 777X are expected to begin in 2023 and will be produced at 2 aircraft per month.
Boeing is also continuing to work closely with the FAA and its customers to address electrical issues on select 737 Max airplanes, which have led to a pause in deliveries that are expected to make April's delivery numbers "very light." The company has delivered over 85 of the 737 Max aircraft since it was approved to return to the skies in November. Boeing also awaits regulatory approval of the 737 Max in China, which will impact order activity and future production rates.
Shares of Boeing fell more than 3% in Wednesday's trading session following the company's earnings announcement.