Global Competitiveness of U.S. Advanced-Technology Manufacturing Industries: Large Civil Aircraft Investigation No. 332-332 Publication 2667 August 1993 Washington, DC 20436 U.S. International Trade Commission COMMISSIONERS Don E. Newquist, Chairman Peter S. Watson, Vice Chairman David B. Rohr Anne E. Brunsdale Carol T. Crawford Janet A. Nuzum Robert A. Rogowsky Director of Operations Vern Simpson Director of Industries under the direction of Aaron H. Chesser, Chief, Machinery and Transportation Division and Dennis Rapkins, Chief, Transportation Branch Project Leader Peder A. Andersen Deputy Project Leader Laura A. Stonitsch This report was prepared principally by John Cutchin, Dennis Fravel, William Greene, Robert Hughes, and Kathleen Lahey Office of Industries Lyle Vander Schaaf Office of the General Counsel with assistance from John Ascienzo Office of Investigations Support Staff Kim Oliver-Parker, Elisa Jackson, and Janice Wayne Office of Industries Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 Global Competitiveness of U.S. Advanced-Technology Manufacturing Industries: Large Civil Aircraft Publication 2667 August 1993 PREFACE On June 11, 1992, the United States International Trade Commission received a request1 from the Senate Committee on Finance to conduct a series of three investigations under section 332(g) of the Tariff Act of 1930 on the global competitiveness of U.S. advanced-technology manufacturing industries. These three studies, on the cellular communications, aircraft, and computer industries, are part of a series begun in 1990 at the request of the Finance Committee. In response to the request of June 11, 1992, the Commission instituted investigation No. 332-332, Global Competitiveness of Advanced-Technology Manufacturing Industries: Large Civil Aircraft, on September 2, 1992. The Committee noted that the global competitiveness of key U.S. industries continues to be of concern and interest to the U.S. Congress, and requested that the Commission study include factors found relevant to the global competitiveness of the industry, including, but not limited to: (1) government policies; (2) regulatory and trade impediments; (3) research and development financing and expenditures; (4) issues of competition in civil aircraft from the Airbus consortium; and (5) the proposed acquisition of U.S. aerospace technologies and manufacturers by foreign interests. Copies of the notice of investigation were posted at the Office of the Secretary, U.S. International Trade Commission, Washington, DC 20436, and the notice was published in the Federal Register (vol. 57, No. 178) on September 14, 1992.2 Public hearings were held in conjunction with this investigation on April 15, 1993.3 The sources consulted in the preparation of this report include domestic and foreign manufacturers, industry associations, airline officials, research establishment officials, and appropriate government officials. Questionnaires were completed by purchasers based in the top three global markets. Testimony at the public hearing and written submissions provided pertinent information on competition in the large civil aircraft (LCA) industry. Staff also completed a rigorous examination of existing literature on competitiveness in general and on competitiveness in the global LCA industry. 1 See app. A. 2 See app. B. 3 See app. C. i CONTENTS Page Preface . i Executive summary . ix Chapter 1: Introduction Scope of the study . 1-1 Approach of the study . 1-1 Data-gathering efforts . 1-1 Competitiveness defined . 1-2 Organization of the study . 1-4 Chapter 2: Structure of the Global Large Civil Aircraft Industry United States . 2-1 Historical development of the U.S. large civil aircraft industry. 2-1 Principal manufacturers post-1945. 2-1 Significant U.S. aircraft programs. 2-1 The jet age . 2-1 Jumbo jets . 2-2 Supersonic transports. 2-2 Structural changes in the U.S. LCA industry. 2-2 Producers/aircraft programs. 2-2 Current conditions . 2-3 Suppliers of primary aircraft subcomponents. 2-5 Fuselage/parts manufacturers. 2-5 Engine manufacturers. 2-5 Type and extent of U.S. technology transfer and risk-sharing agreements. 2-6 Background to technologies underlying the LCA manufacturing industry. 2-6 Technology transfer agreements between U.S. companies and foreign firms. 2-6 Role of risk-sharing in the development of LCA. 2-7 Airframe manufacturers. 2-7 The Boeing Co.. 2-8 McDonnell Douglas Corp. 2-9 Proposed alliance with Taiwan. 2-10 Suppliers . 2-10 General Electric. 2-10 Pratt & Whitney. 2-11 Relationship of U.S. LCA industry to military aircraft industry. 2-11 Strengths of the U.S. LCA industry. 2-11 Western Europe . 2-12 Historical development of the West European LCA industry. 2-12 Principal manufacturers post-1945. 2-12 Principal cooperative programs. 2-12 Concorde . 2-12 Airbus Industrie, G.I.E. 2-13 Suppliers of primary aircraft subcomponents. 2-15 iii CONTENTS-Continued Page Chapter 2: Structure of the Global Large Civil Aircraft Industry—Continued Relationship of West European LCA industry to military aircraft industry. 2-15 Strengths of the West European industry. 2-16 Airbus product strategy. 2-16 Airbus marketing strategy. 2-16 Government direct support. 2-17 Commonwealth of Independent States. 2-17 Historical development of the CIS LCA industry. 2-17 Structural changes in the CIS LCA industry. 2-18 Producers . 2-18 Suppliers of primary aircraft subcomponents. 2-20 Role of risk sharing in the development of CIS LCA. 2-20 Airframe manufacturers. 2-20 Suppliers . 2-20 Chapter 3: Structure of the Global Large Civil Aircraft Market Description of the principal regional markets and purchasers. 3-1 The U.S. market . ..