Airbus made a $4.5 billion profit last year; does it need taxpayer funds?

MOBILE, Ala. (WALA) - Despite concerns from a pair of Mobile County commissioners, a large economics incentives package for Airbus appears poised to pass in the coming weeks.

The Mobile City Council is set to vote Tuesday on a $10 million proposal, spread out over a decade. The Mobile County Commission is considering a similar $10 million deal. Part of the money would go to job-training programs, while the rest would subsidize a plant expansion. The state has pledged money, as well, but the Alabama Department of Commerce has failed to respond to repeated inquiries form FOX10 News about the details.

At a County Commission agenda-setting meeting earlier this month, Commissioner Randall Dueitt raised equity concerns.

“A lot of my concerns, everybody knows, is the same as it is for every corporation that we give our tax dollars from the citizens of Mobile County, and it’s their money, to a corporation,” he said. “And some of these people own local businesses who struggle and can barely keep their doors open.”

Dueitt also has expressed reservations about giving taxpayer money without stronger assurances that more higher-earning Airbus employees will live in Mobile County. Commissioner Merceria Ludgood has voiced concerns over minority representation in the workforce.

But Commission President Connie Hudson told FOX10 News she is confident it will pass.

“I think, ultimately, yes,” she told FOX10 News. “It will be approved. … I think, ultimately in the end, this is going to be approved, and Airbus is going to get on with their expansion and hiring of another 1,000 employees and go on to even bigger and better, greater things here.”

Airbus is no ordinary corporation. It reported a $4.5 billion net profit last year – a record for the airplane manufacturer. To keep of with worldwide demand, it is building a third final assembly line at its sprawling facility at Mobile Aeroplex at Brookley.

Local government leaders justify the taxpayer expenditures by pointing to the additional 1,000 jobs. The city and county agreements include provisions taking back incentives if the company does not hit job targets.

But the taxpayer subsidies are somewhat unusual given that Airbus already is building the additional assembly line to meet strong demand for its A220 family of jets. Typically, governments offer incentives to induce companies to locate or expand in one place instead of another.

“So the rationale in terms of trying to lure or keep the facility in this case is pretty weak. … There’s no clear rationale to say, ‘OK, we’ll do these incentives so you will make sure you do this,” said Daniel Sutter, an economics professor at Troy University.

Airbus largely has stayed out of the public debate. An Airbus Americas spokeswoman told FOX10 New earlier this month that the company is grateful for its “strong partnership” with state and local leaders.

Suter told FOX10 News that there are longer-term considerations. He pointed to the importance of maintaining a “positive relationship” with such a large and important employer to head off even the possibility that it might one day relocate.

“There’s an old line I remember from college football coaching: If you wait for some other school to come and recruit your coach, and then you’re going to try to make a deal to keep them to stay, it’s probably too late,” he said.

Hudson cited a similar rationale.

“Airbus has presented a tremendous opportunity for Mobile County and the city of Mobile – really, the entire region,” she said. “I mean, when you think about it, to be the fourth-largest airplane manufacturing facility in the world that the company has is right here in Mobile – how fortunate we are to have that partnership. And it has paid off exponentially for our community.”

Sutter said dangling incentives to lure a company often can lead to a bidding war that results in a “winner’s curse” – vastly overpaying to win a new project. He said that risk should be lower when it comes to offering taxpayer support to an existing business.

“There’d probably be less of an issue,” he said. “You should certainly be able to much better evaluate exactly how much of an impact on the local economy the expansion of this facility is gonna have given that Airbus is already here with – I think, what? – two lines currently working.”

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