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The factory, which will be built in Toowoomba, Australia, will assemble military drones, not commercial jets, which is Boeing’s core business. But it’s an interesting step away from the United States for the company.
Boeing’s defense, space and security division has been its strongest source of revenue over the past difficult years for Boeing. The unit has reported $ 26 billion in revenue each year since 2018, while the company’s commercial aircraft revenues have plunged $ 41 billion, or 72%, in the face of the 737 Max crisis and pandemic.
In 2020, about 83% of these defense activities came from the United States Department of Defense. But the division also has important foreign customers.
Much of Boeing’s core business comes from overseas. In 2018, when the aircraft manufacturer posted record sales of $ 101 billion, 56% of those dollars came from foreign customers.
Boeing’s Australian operations team designed the drone, known as the Loyal Wingman, to be built there. The plant is expected to create 3,500 new full-time jobs by 2028. Currently, the Australian Air Force is the only confirmed customer for the drone, but Boeing plans to export it to other military customers in the world.
The news follows a separate announcement that Australia intends to build a fleet of nuclear-powered submarines with the use of technology shared by the US and UK. The move is seen as an effort by the United States to curb China’s growing military ambitions in the region.
There was a time when the giant American manufacturers made all or almost all of their products in the United States. Boeing (BA) is anything but the only one to make this claim today. For example, General Motors (DG) and Ford (F) both build more cars in non-US factories, in countries like China and Mexico, than in the United States.
Part of the reason automakers and other manufacturers build their products elsewhere, beyond lower labor costs, is to reduce delivery times and expense when selling in overseas markets. It’s not as big a problem for Boeing, which can fly most of the products it makes to its customers.
Boeing already had its largest non-US operation in Australia, with around 4,000 employees, some of them doing pre-assembly work on parts shipped to the company’s US factories.
It also has a facility in China that has been set up to complete the interiors and final painting of the 737 Max commercial jets that it sells there. Part of the reason for locating the plant there was to appease the Chinese government, which must approve all aircraft sales in the country.
But this facility, which opened at the end of 2018, only completed one 737 Max before two fatal accidents brought the aircraft to a global standstill.
Although most countries re-allow the plane to carry passengers, the 737 Max remains grounded in China. Meanwhile, amid mounting trade tensions between China and the United States, Boeing sales in China have slowed.
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